As TaiwanÆs financial deregulation plan moves ahead, some fund executives in Hong Kong are eyeing the islandÆs new-found ambition of becoming a leading asset management hub in Asia with unease.

For fund players who are used to the comforts of financial- and tax-related freedom in Hong Kong, Taiwan appears to be a palpable force that is challenging Hong KongÆs position in Asia.

ôTaiwan will keep us on our toes,ö says Gerry Ng, who is starting his term as chairman of the Hong Kong Investment Funds Association (HKIFA). Ng is also managing director of Baring Asset Management in Hong Kong.

In the past, Hong Kong has probably enjoyed more privileges thanks to its easily accessible geographic location and financial supplication in the international market, says Ng.

With Taiwan entering the asset management picture, the competitive landscape in Asia is certain to be reshaped over the long-term. While the island will make an interesting competitor, Hong Kong still has a lead of about 10 years in terms of market infrastructure and actual financial management expertise, Ng says.

HKIFA's vice-chair, Eleanor Wan, who is also the Hong Kong CEO of Allianz Global Investors, reminds industry leaders that all is not grim. After all, Hong Kong is the worldÆs biggest offshore hub for Benelux-registered investment products, she says.

Taiwan will be a credible challenge regionally, and generally itÆs good to have competition bring out the best of innovations, Wan says. But she asks industry leaders to set their sights higher.

ôHong Kong is an international player. Our competitors are not regional û our competitors are New York and London,ö she says.

Taiwan's fund management industry "has been trapped in a long period of stagnation", she says, noting that what the island is doing is merely catching up.

Maintaining its role as an offshore fund centre will be important for Hong Kong. If the city is to continue to stay ahead of the curve, continued innovation in the regulatory framework will be key. Ng sees room for improvement in the areas of market support, such as settlement arrangements and open market rules.

The pair says promoting Hong KongÆs asset management industry on the international stage and continuing HKIFAÆs mandate to improve investor awareness are their leading items on their agenda during their one-year term.

The association will make it a priority to continue its dialogue with the Hong Kong's Securities & Futures Commission and the mandatory provident fund regime to find ways to sustain and strengthen Hong KongÆs competitive advantages, they say.

The HKIFA is working to court and enhance its relationship with ChinaÆs financial regulators and investment counterparts.

Meanwhile, Wan says investors should not lose sight of their long-term goals despite the tough market conditions at the moment.