Wealth Management Connect: HSBC, Standard Chartered among top banks eyeing Greater Bay Area sales boost with roll-out of enhancements to cross-border investment scheme

The People’s Bank of China’s (PBOC) Guangdong branch completed a 12-day consultation on December 12 on a wide range of relaxations to the scheme, including tripling individual quotas to 3 million yuan (US$420,745) from 1 million yuan. The new measures will also lower the threshold for mainland investors trading under the scheme, widen product choices and allow securities firms to sell products as well instead of just banks.

The new measures will also relax the sales process, allowing banks and securities firms to introduce product information to investors instead of current practice, where these firms can only execute orders and cannot introduce the products.

“The proposal is expected to attract more participants to the Wealth Management Connect scheme for their cross-boundary investments, thus increasing the scale of the pilot scheme,” said David Liao, the Asia-Pacific co-CEO at HSBC. “We are studying the proposal and are getting prepared to seize potential opportunities.

“The proposed enhancements will allow more residents in the Greater Bay Area to have a greater variety of investment options. This provides investors with greater flexibility to adjust their investment portfolios in response to market conditions and their risk appetite.”

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The scheme, launched in September 2021, is Beijing’s first plan tailor-made for the 11 cities in the development zone. It allows 24 banks, including HSBC and Standard Chartered, to sell Hong Kong investment products to residents in the zone’s mainland cities through 31 partners.

As of the end of October, the scheme had attracted about 62,900 investors, who had invested 8.66 billion yuan, according to government data. This represented only about 3 per cent of the scheme’s total quota of 300 billion yuan.

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Sun Yu, chairman of the Hong Kong Association of Banks, who is also the vice-chairman and CEO of BOCHK, also welcomed the enhancements to the Wealth Management Scheme.

“Enhancements to the Wealth Management Connect scheme will support the development of cross-boundary trading and promote the cross-border flow of the yuan, paving the way for the development of the financial sector in the Greater Bay Area,” he added.

Greater Bay Area investors’ need to diversify their investments will further boost sales under the scheme, said Sharine Wong, a senior industry analyst at Bloomberg Intelligence.

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“China’s policies to stimulate economic growth, investors’ diversification needs and a widening interest-rate differential between the US and mainland China should fuel demand for financial products,” Wong said.

The cumulative value of wealth management and fund products held by Hong Kong and Macau investors totalled 227 million yuan at the end of October, largely steady over the past six months. Monthly northbound sales ranged from 15 million yuan to 29 million yuan from the beginning of this year to the end of October, Wong added.

“The Greater Bay Area development zone will be a growth engine of our business,” Li said. “After the relaxation of the sales process, increasing the quota and adding more product choices, sales via the Wealth Management Connect scheme are set to increase in future.”

Allowing securities firms to sell scheme products is a positive, said Katerine Kou, chairwoman of the Hong Kong Securities Association.

“However, it is not going to benefit all the about 600 stockbrokers in Hong Kong, as not all of them have the licence to sell mutual funds,” she added. “Only brokers that have asset-management licences will benefit from the move.”