Hong Kong’s fund industry on road to recovery as financial watchdog looks to raise global appeal of city’s markets

Hong Kong’s fund industry remained resilient amid macroeconomic challenges last year and is starting to rebound now, according to a director of the city’s financial watchdog, who adds that increasing the city’s global competitiveness and its connections with other markets are top priorities for future development.

Hong Kong-domiciled funds saw 5 per cent growth in assets under management in 2023, with net inflows increasing more than 200 per cent year on year in the first three quarters to HK$54 billion, Choi said at a roadshow held by the Association of the Luxembourg Fund Industry.

“The idea is not just that we need to update and implement international standards, but we want to take a fresh look at the product approvals in Europe,” Choi said. “We closely monitor and try to think ahead – how could we facilitate the launch of similar products here while maintaining investor protection.”

The SFC is “ambitious” about expanding mutual recognition and the ‘Connect’ schemes that allow cross-border trading with mainland China. “And on the other hand, we also want to work with the industry and our stakeholders to look at other markets, like the Middle East, other parts of Asia and around the world,” she said.

As Asia’s largest hedge fund hub and cross-border wealth-management centre, Hong Kong’s asset management business amounted to over HK$30.5 trillion as of the end of 2022, with 64 per cent of the funding sourced from non-Hong Kong investors, according to the Financial Services and the Treasury Bureau.

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The SFC had authorised 2,927 funds as of the end of September 2023, according to data from the regulator.

On the ESG side, Choi said the major focus for the fund industry would be “tackle potential greenwashing”, adding that Hong Kong has issued clear guidance on how regulators will allow retail funds to name and market themselves as “ESG funds”.

“I think in a way the best approach is a good disclosure-based approach, as we ask fund managers for an annual assessment of how their ESG goals are attained and we monitor the disclosure,” Choi said. “So far there are no big issues because we have implemented this more front-loaded approach.”