In response to Hong Kong’s declining status as an international financial hub, the expansion of family offices (where wealthy individuals set up private companies to manage their investments) is one of the key performance indicators (KPIs) for the Hong Kong government. are becoming one.
With border crossings by China nowhere to be seen, Hong Kong authorities have opted to find investors in the Middle East. A senior hedge fund manager believes the financial industry will only get more difficult under the current political environment.
In a policy speech recently released by the Hong Kong government, it said it would implement measures to attract talent and companies. A bill to provide tax exemptions for eligible family offices will be proposed later this year, the report said.
Aiming to establish or expand development in the city by setting up at least 200 family businesses by the end of 2025, the Hong Kong government and authorities have set the move as one of their key KPIs.
Building on previous reports, InvestHK will send staff to Abu Dhabi and Dubai to facilitate the development of family offices in Hong Kong.
Established Invest HK Family Office HK According to plans, the team will head to London and Zurich in November to continue the promotion after visiting the Middle East.
Singapore has a head start in the family office business
Hong Kong is two years behind its rivals in family office strategy compared to Singapore.
The Monetary Authority of Singapore (MAS) and the Economic Development Board developed the Family Office sector in March 2019, furthering Singapore’s position as a global wealth management and family office hub.
According to data released by MAS, the number of family offices in Singapore surged fourfold from 2017 to 2019.
As of 2020, there are approximately 400 single-family offices in Singapore, each with an asset value of US$100 million. In 2018, there were only 27 single-family offices.
Bloomberg estimates that there will be 700 registered family offices in Singapore by the end of 2021, from MAS estimates.
Bridgewater Capital founder Ray Dalio and Google co-founder Sergey Brin are some of the names of Singapore’s wealthy western family offices. According to recent reports, Asia’s second richest man, Mukesh Ambani, also had a shop in Singapore.
National Security Laws and Dynamic Zeros Harm Business
Family office development is not an absolute indicator of a successful financial hub, but being overtaken by competitors in such a short time is a microcosm of Hong Kong’s sinking international financial position.
The latest ranking of Global Financial Centers Index (GFCI) has proven that Hong Kong has fallen to fourth place in the world rankings. At the same time, Singapore overtook Hong Kong to move into her third place, and nearly tied with New York and London.
Edward Ching Chi-King, a prominent senior hedge fund manager, said the funds had already left Hong Kong before the pandemic. “Hong Kong’s decline in status as a financial hub stems from two reasons: 80% are affected by national security laws, while strict COVID-19 prevention measures have reduced his 20%. I am delaying.”
Chin further argued that this was the result of the government’s withdrawal of Hong Kong-listed companies on various charges within a year from the NSL. “How do you attract international investors to Hong Kong when the government accuses major shareholders and executives of listed companies of violating so-called national security?”
At a time when many countries decided to coexist with the COVID-19 virus, Hong Kong still chose to follow a dynamic zero and limit gatherings of up to 12 people.
Chen believed that the false pretense that “Hong Kong was back to normal” may have had a negative impact.
Immigration moves money
Multinational investment advisory firm Henley & Partners’ report on global billionaires finds overseas migration of the wealthy driving capital transfers, with Singapore, the Middle East and Australia being the monopoly winners .
The report also estimates that by 2022, 15,000 wealthy people will leave Russia permanently and 10,000 will leave China. Meanwhile, Hong Kong is also expected to lose her 3,000 of the richest families.
Many wealthy people have made Singapore and the United Arab Emirates ideal destinations for immigration.
The report forecasts that the net influx of global HNWIs reaching the UAE will be close to 4,000, followed by Australia with about 3,500 and Singapore with 2,800.
Hong Kong, once the second richest city in the Asia-Pacific region after Tokyo, has now been overtaken by the likes of Singapore as the wealthy migrate.
Henley & Partners’ latest report on billionaires ranks the ultra-rich based on those who can afford to pay at least $100 million in investable funds.
Hong Kong had only 280 millionaires compared to Singapore’s 336.
According to China Construction Bank’s website, Family Office is a top-notch service with a high investment amount and personal or investable family assets of more than US$100 million.
It also points out that US$25 million for a single family office and US$10 million for multiple family offices is the minimum investment as family businesses are becoming more specialized in the US and Europe.
In its 2019 Hong Kong Private Wealth Management Report, private wealth consultancy KPMG said: “In the next five years,[中国]Mainland-based and managed assets will account for almost half of the private wealth management market.”[China}mainlandwillaccountfornearlyhalfoftheprivatewealthmanagementmarket”[China}mainlandwillaccountfornearlyhalfoftheprivatewealthmanagementmarket”
The 2021 report also highlights that the COVID-19 pandemic has had the greatest impact on private wealth management businesses in Hong Kong.
In recent years, the Beijing government has advocated a dynamic zero policy and shut off the outside world. Hong Kong’s commercial industry has called on the government to reopen its border with China while the market waits for Chinese funds to move south. The end of dynamic zero became the most important issue.
Alicia G. Herrero, chief Asia economist at Natixis, told the Epoch Times that she believed Beijing would be reluctant to reopen the country next year, judging by capital outflows. “This is a big risk for the Chinese government because their biggest fear is what will happen as soon as people leave the country.”
China’s balance of payments report showed a net outflow of US$45.2 billion due to errors and omissions. Herrero told Reuters the phenomenon reflected an informal movement of resident funds.
“Not only have foreign asset managers stopped investing in China, but confidence wobbles have also exacerbated undocumented outflows. Mainland Chinese residents want to withdraw their money.”
According to the 2022 Hong Kong Private Wealth Management Report, the biggest driver of industry growth will lie in further penetrating the mainland market and attracting younger generation investors and family offices to Hong Kong.
Hong Kong government fishing for overseas wealth
Senior investment adviser Mike said the global situation had presented Singapore with a once-in-a-lifetime opportunity. However, it does not last indefinitely. “In addition, compared to Hong Kong, there is still a significant gap between Singapore’s market capacity and its position in traditional financial markets.”
Mike continued, “Hong Kong officials head to the Middle East first because there are a lot of wealthy people in the Middle East. The Russo-Ukrainian War also drove Russian assets to the Middle East.
Senior hedge fund manager Edward Ching fears that Hong Kong’s current and future political environment will become more and more hurdles for the financial industry. “Just because your money stays in China doesn’t mean it’s your money. Hong Kong may be the same.”
follow