Though demand in Hong Kong for renminbi products is strong and the launch of the HK-Shanghai Stock Connect is on the horizon, China equity comes fourth on investors’ RMB product wishlist, a new survey finds.
Overall, 80% of respondents to the Hong Kong Investment Funds Association (HKIFA) poll of 133 Certified Financial Planner (CFP) professionals say their clients are interested or very interested in investing in China.
Forty-four percent and 49% say their clients are very interested or interested in investing in RMB products, respectively.
China tops investors’ market preferences, followed by Hong Kong, the US, Asia, Europe and emerging markets.
Investors are most likely to add RMB fixed deposits to their portfolios in the next six months, followed by renminbi bonds, funds, equities, and structured deposits, in that order, finds the survey, conducted in March and April.
This suggests investors expect the RMB to appreciate, and that they are not so bullish on Chinese stocks.
In general, equities are favoured most, followed by funds, fixed deposits and FX, bonds, structured products and derivatives.
The Stock Connect link between the Hong Kong and Shanghai bourses will allow institutions and wealthy people to trade equities cross border. The initiative was unveiled by Chinese premier Li Keqiang on April 10, as reported.
Earlier this month the securities regulators and stock exchanges of Hong Kong and Shanghai released further details on the mechanics of the programme, as reported.
Though the appetite for China equities hasn’t been ignited, investors are bullish on renminbi share-class funds, which bodes well for the mutual recognition of investment products between the mainland and Hong Kong.
Ranked in order of preference, excluding US and Hong Kong dollars, respondents said their clients are most interested in renminbi share-class funds, followed in descending order by Australian dollar, euro, sterling and New Zealand dollar share classes.
If mutual recognition is implemented, more renminbi products will likely be made available to Hong Kong investors.
Bruno Lee, unit trust subcommittee chairman for the HKIFA, says the initiative will provide an excellent platform for Hong Kong investors to get exposure to the Chinese market via funds managed by mainland companies.
“As more initiatives are being developed and more channels have opened up, the types of hedged or unhedged RMB funds or share classes will continue to broaden to fulfill the strong demand in RMB-based products from investors,” he adds.
The survey points to the increasing importance of mainland investors in Hong Kong.
A fifth of respondents say 20-40% of their clients are from China, and about 10% say mainlanders comprise 40% of their client base. A further 23% say Chinese investors account for 20-40% of their clients’ assets, and 17% report that mainlanders account for over 40% of client assets.
Mainlanders are more willing than Hongkongers to take on risk, 70% of respondents report.
As for macroeconomic factors concerning investors, the pace of US tapering and interest rate hikes top the list, followed by renminbi appreciation, economic reform in China and the pace of global economic recovery.
Respondents were from insurance companies (56%), retail banks (19%), independent financial advisory firms (16%), private banks (3%) and fund houses (2%).
Two thirds of them serve retail clients, and 20% serve affluent investors as their main clients, and the remaining 8% focus on high-net-worth investors.