HSBC Holdings attracted more than 130,000 new bank customers in Hong Kong in the first quarter. Bank of China (Hong Kong) gained 200,000 new cross-border clients in 2023, while at Hang Seng Bank, new account openings for non-residents jumped 342 per cent last year.
The surge is in large part being driven by mainland Chinese flocking to Hong Kong and offers a welcome bright spot for the city that’s struggling to recover after the pandemic and years of political upheaval.
Many are opening accounts to tap a wider range of investment options – from insurance to fixed deposits – to capture the Asian financial hub’s higher interest rates and escape mainland China’s moribund markets.
Earlier this year, Standard Chartered was offering short-term deposit rates of as high as 10 per cent to attract Chinese customers. Regulators in Beijing have also clamped down on high-yielding wealth management products onshore while sinking real estate prices have sapped nest eggs across China.
“There’s a massive growth of assets under management going from the mainland to offshore markets,” said Maggie Ng, head of wealth and personal banking for Hong Kong at HSBC. “We are the first port of call for these mainland customers looking to make investments overseas.”
Hong Kong’s role as an investment hub will be the focus of the Bloomberg Wealth Asia Summit in the city on Wednesday (Jun 5), with speakers from UBS Group, HSBC and Julius Baer Group.
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Capital controls
Still, getting large amounts of cash out from the mainland to Hong Kong is difficult since capital controls only allow the equivalent of US$50,000 to be taken out annually.
Nevertheless, Hu, a housewife from Shanghai who asked to be identified by her last name, is going to move money bit by bit to Hong Kong after travelling to the city last year to open an account with the Bank of China’s local operation. She’s helping her daughter buy an apartment in the city at some point.
For now, she has put her money mostly into fixed deposits and equities. The process of opening an account was “relatively easy” if you come to Hong Kong in person, said Hu.
During the first quarter, insurance sales to mainland visitors jumped 62.6 per cent to HK$15.6 billion (S$2.7 billion), according to the Insurance Authority. AIA Group and Prudential are among the insurers reaping the benefits from mainland Chinese returning to Hong Kong.
Net inflows for Hong Kong retail funds hit US$3.8 billion in the first quarter, a three-year high. For all of last year, net fund inflows into Hong Kong-domiciled investment funds rose 93 per cent, according to the city’s Securities and Futures Commission chief executive officer Julia Leung.
HSBC’s Ng said portions of the money the bank is attracting is going into fixed deposits to lock in a higher rates, mainly in US and Hong Kong dollars. The bank is increasingly seeing “a lot more protection” needs from Chinese customers post-Covid, she said.
Hong Kong’s government is actively seeking to lure the wealthy with a plan that offers residency to individuals who invest about HK$30 million into stocks, debt and funds, while the top talent programme has attracted mainlanders to the city.
“I think people are looking for maybe different options now that they have come out of the Covid lockdowns,” said Richard Harris, chief executive officer of Port Shelter Investment Management. “It is part of the diversification process.”
Of HSBC’s 130,000 new bank customers in the first three months, about 60 per cent were non-residents with “a large proportion” from the mainland, according to Ng.
Operating income at rival Standard Chartered’s overall wealth solutions business rose 21 per cent during the first quarter, thanks to affluent new-to-bank customers and net new money which doubled year on year to US$11 billion.
There’s a “distinct trend” of rising offshore investment from rich mainland investors, according to Andrew Haslip, head of content for Asia-Pacific at research firm GlobalData. The proportion of mass affluent Chinese that invest abroad rose to 51 per cent in 2023 from roughly 28 per cent in 2021, he said, adding that this is likely supported by cross-border programmes.
Wealth Connect, a programme that allows residents in major southern cities such as Shenzhen and Guangzhou to invest in Hong Kong, has also picked up. Southbound sales surged to 22.3 billion yuan (S$4.1 billion) in April, up from just 382 million yuan a year earlier. Authorities tripled the investment quota to three million yuan for investors in February.
Yuan fears
Concerns about a potential yuan devaluation are also fuelling the movement of money offshore, according to Natixis. Supporters of a sharp currency depreciation say it would allow Beijing to boost exports and give the central bank room to cut interest rates.
“There’s been rumours of a devaluation of the renminbi,” said Alicia Garcia Herrero, chief economist for Asia-Pacific at Natixis. “That’s clearly pushing out outflows from China.”
Money laundering scandal in Singapore has also resulted in tighter standards in Singapore and visas for mainland professionals are harder to come by, according to Garcia Herrero. BLOOMBERG
