Hong Kong looks set to emerge as a major cross-border fund domicile, according to research from Brown Brothers Harriman.
In a survey of 52 global asset managers, 80% believe there is a medium to high probability that Hong Kong will be a leading Asian cross-border fund domicile by 2025 with the introduction of open-ended fund companies viewed as critical to the growth of Hong Kong as a fund domicile.
The wider region of Greater China was also ranked by 68% of respondents as very or extremely important to their firm’s global strategy.
In spite of results revealing a bullish attitude towards Greater China, 58% of participants still believe that the role of UCITS in the region will increase.
The results are the latest in the trend of Chinese markets becoming more accessible for foreign investors due to developments such as Stock Connect and the growth of the domestic bond markets.
The Shenzhen-Hong Kong Stock Connect trading link officially launched on 5 December following approval from regulators.
Launching Shenzhen alongside the existing Shanghai-Hong Kong venture, which launched in November 2014, is aimed at building a more extensive capital market and capitalising on the geographical advantages of Shenzhen.
It is also hoped that the venture will allow investors to experience increased economic benefits from both mainland China and Hong Kong, increase cooperation between the two and consolidate Hong Kong’s position in the financial industry.
Speaking to Global Custodian in August, Florence Lee, head of China sales and business development, EMEA, securities services at HSBC, said the Shenzhen link represented a further sign of China’s markets becoming more liberal.
“In the past, no matter who you were, you would have to go through a very lengthy approval process in China with a lot of documents needing to be submitted to Chinese authorities,” said Lee.
“When the Stock Connect was launched, all an overseas investor has to do is go to Hong Kong, find a broker, set up a brokerage account in Hong Kong and start trading through the Stock Connect programme. The new development now finally includes the other stock exchange in China, the Shenzhen, and in terms of stock selection this will give a manager much wider scope. “
Hong Kong to be key fund hub says BBH
A majority of surveyed asset managers believe that Hong Kong will emerge as a leading cross-border fund destination.