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Wealth in Hong Kong: Sizing the Market Opportunity

Wealth in Hong Kong: Sizing the Market Opportunity

SummaryThe number of affluent investors in Hong Kong grew to 2.4 million in 2015, achieving a lower rate of growth than its long-term average since the financial crisis rocked the market in 2008. Yet Hong Kong remains an attractive market. 40% of the adult population is considered affluent, comparable to markets in the developed West, while growth rates still resemble those found in the East. Growth going forward will be more modest for both affluent investor numbers and assets. But with affluent assets still forecast to achieve 7.2% annual growth over the years to 2019 – due to more residents moving into this class and a general appreciation of capital – Hong Kong retains much of its allure as a source of new clients for wealth managers.

Key Findings

  •  The total number of affluent investors in Hong Kong is forecast to grow to 3.3 million by 2019.
  •  Retail savings and investments are dominated by deposits, and despite the low returns on offer this is not expected to change as investors will remain cautious.
  •  High net worth (HNW) investors are equally cautious in their onshore liquid investment portfolio allocations, with a modest 6.3% held in alternatives, commodities, and property.
  •  Strong global links make Hong Kong HNW investors among the most ready to offshore, with 40% of their wealth booked offshore.
Synopsis

Verdict Financial’s “Wealth in Hong Kong: Sizing the Market Opportunity” analyzes Hong Kong’s wealth and retail savings and investments markets, with a focus on the HNW segment. The report is based on our proprietary datasets.

Specifically the report:
  •  Sizes the affluent market (both by the number of individuals and value of their liquid assets) using our proprietary datasets.
  •  Analyzes which asset classes are favored by Hong Kong’s investors and how their preferences impact the growth of the total savings and investments market.
  •  Examines HNW clients’ attitudes towards non-liquid investments such as property and commodities.
  •  Identifies key drivers and booking centers for offshore investments.
Reasons To Buy
  •  Benchmark your share of Hong Kong’s wealth market against the current market size.
  •  Forecast your future growth prospects using our projections for the market to 2019.
  •  Identify your most promising client segment by analyzing penetration of affluent individuals in Hong Kong.
  •  Evaluate your HNW proposition by understanding how the local tax system affects your HNW clients.
  •  Review your offshore strategy by learning HNW motivations for offshore investments and their preferred booking centers.


  • Executive Summary
    • The Hong Kong wealth market remains highly appealing
    • Key findings
    • Critical success factors
  • Sizing and Forecasting the Hong Kong Wealth Market
    • Hong Kong's importance as an offshore center is growing rapidly
      • Mutual funds dominate the offshore market
      • Retail non-resident deposits constitute a relatively small proportion of total deposits
    • The onshore wealth market will continue to grow at a reduced rate
      • In Hong Kong, HNW individuals represent 1.3% of the total adult population
      • Affluent individuals will hold 96% of total liquid assets in Hong Kong
  • Drivers of Growth in the Hong Kong Wealth Market
    • Hong Kong's retail investment market has performed strongly in recent years
      • Retail savings and investments growth will continue to support wealth creation
      • Investors in Hong Kong are strongly biased towards deposits
      • Bonds are the fastest-growing asset class
    • Deposit growth will continue to outstrip GDP growth
      • 2015 was a challenging year for Hong Kong's economy
      • Interest rates will rise, but gains will be low once inflation is factored in
    • Bond holding growth will match real GDP growth through 2016-19
      • The Retail Debt Issuance Programme is helping stimulate bond growth
    • Equities and mutual funds are most allied to the performance of the Hong Kong stock market
      • Hong Kong's stock market has performed poorly in recent years, giving little capital appreciation to long-term investors
      • Despite a disappointing stock market performance, equity and mutual fund holdings experienced strong growth
  • HNW Investment Preferences
    • HNW individuals in Hong Kong allocate 6% of their assets into non-traditional investments
      • Property dominates non-traditional investments
      • Dissatisfaction with traditional asset classes is driving demand for alternatives
    • HNW investors in Hong Kong hold 40% of their wealth offshore
      • Hong Kong's large expat base will appreciate providers that can assist with offshore investment
      • Access to better investment options and the expectation of better returns overseas are the biggest drivers of offshore investment
      • Tax is a comparatively limited driver for offshore investments
        • Table Net Chargebale income tax rates in Hong Kong, 2009-10 to 2015-16
        • Table Standard tax rate Scenarios, 2015-16
        • Table Ad valorem stamp duty rates
        • Table stamp duty as per property lease
      • The offshore wealth of Hong Kong's HNW individuals is spread around the globe
  • Appendix
    • Abbreviations and acronyms
    • Supplementary data
      • Table Hong Kong adult population segmented by affluent category and asset band (00s),2010-14
      • Table Hong Kong :adult population segmented by affluent category and asset band (00s), 2015e-19f
      • Table Hong Kong: total liquid wealth segmented by affluent category and asset band ($bn),2010-14
      • Table Hong Kong: total liquid wealth segmented by affluent category and asset band ($bn), 2015e-19f
    • Definitions
      • Affluent
      • Common Reporting Standard
      • Domicile
      • DTA
      • FATCA
      • HNW
      • Liquid assets
      • Mass affluent
      • Onshore
      • Residency
      • TIEA
    • Methodology
      • Global Wealth Model methodology
      • Global Retail Investments Analytics methodology
        • Table Hong Kong dollar-us dollar exchange rate, December 31, 2014 and December 31, 2015
      • Verdict Financial's 2015 Global Wealth Managers Survey
    • Bibliography
      • Further reading
      • About Verdict Financial
      • Disclaimer

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