Hong Kong has the largest number of fund managers, one of the largest fund management industries in Asia-Pacific, and the largest exchange-traded funds (ETFs) market by trading value in East Asia. Nevertheless this sector in common with some others examined in this study, reveals the huge impact the Chinese mainland has had on Hong Kong in terms of activity created and concurrently a relatively modest development of its international position. Some of the main themes to be developed in what follows turn on the following summary observations:
Unlike the two other major regions of the world economy, there is no cooperation infrastructure nor even comparable statistics for the fund management industry in Asia-Pacific. Unlike the United States and Europe that have a national or regional industry association to advocate regulation and policy recommendations to the industry, there is no such kind of regional cooperation in Asia. In turn, is a dire lack of comparable statistics in this area across economies in the region not only impedes research but more importantly hinders the development of initiatives, strategies and policies for the region.
Internationalism and diversifications. Hong Kong’s and Singapore’s industry survey reports show that the combined fund management industry is larger in Hong Kong, but (as of 2008) it appears to be more internationalized and diversified in Singapore. However, things have gradually changed. Since 2009 large banks and fund houses have started to expand their teams in Hong Kong and/or relocate senior executives to the city. While this relative but notable reconfiguration in the last year or two appears to result from the impact of the China factor, given the sector’s relative preference for greater concentration of expertise the result is also an improved the level of regional importance and internationalism for the Hong Kong fund management industry.
The China factor. The enormous and underdeveloped Chinese market is without doubt one of the biggest opportunities for the Hong Kong fund management industry. China’s capital market is still subject to exchange and capital controls and its fund management industry is short of seasoned fund managers. Hong Kong, an open economy with good financial infrastructure and many experienced fund managers, is in pole position to capture the opportunity to service the Chinese market, particularly its new middle-class and expanding wealthy population. Further, it will be beneficial for Hong Kong to deepen its private investors market. In addition to be the gateway for Chinese funds to invest abroad, Hong Kong should also be the gateway for foreign companies that are interested in the Chinese market.
An onshore fund management industry. Following the global financial crisis, there is greater appetite in the region and globally for the use of onshore regulated vehicles, which provide greater investor protection and ability to assess and manage risk. In this connection recent changes in European Union directives on investment funds may have a big impact on the Asian fund management industry, which relies heavily on the European market; indeed the offer of funds originating and sold in Asia but registered and marketed from Europe has expanded notably in the recent past. These developments, alongside the concurrent strengthening of Hong Kong’s fund management industry in the same period noted above, strongly suggest a good opportunity for Hong Kong to develop an onshore fund management industry and to seek to become the centre of Asia domiciled funds. However, there is limited information how local authorities want to pursue these goals.
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