Hong Kong's Fund Managers Told Of New Opportunities
Tuesday, November 1, 2011
A speech by Hong Kong’s Financial Secretary, John C Tsang, at the Annual
Conference of the Hong Kong Investment Funds Association, looked at how Hong Kong's
asset management industry can steer a path towards new opportunities during the
period of China’s 12th Five-Year Plan.
Firstly, he confirmed that Hong Kong's combined fund management business now
exceeds HKD10 trillion (USD1.3 trillion); that currently two-thirds of funds
are sourced from non-Hong Kong investors; and that Hong Kong continues to be
a preferred location for overseas fund managers in Asia, due to its main advantage
of proximity to the Mainland and well-defined status as a global financial centre
in the Asian time zone.
As the Mainland continues its reforms and opening up policies, he added that
Hong Kong is the ideal testing ground for renminbi (RMB) products. At the end
of August this year, total outstanding RMB deposits in Hong Kong amounted to
some RMB610bn (USD96bn), almost a tenfold increase since 2009.
In addition, by September this year, there had been 95 RMB bond issues, totalling
around RMB160bn, while, in the first eight months of this year, more than RMB1
trillion worth of Mainland trade was settled in Hong Kong (more than 80% of
the total trade settled in RMB).
The National 12th Five-Year Plan adopted in March this year, he said, explicitly
supports the development of Hong Kong as an offshore RMB business centre and,
for the first time, it affirms the function and role to be played by Hong Kong's
asset management industry.
Tsang pointed out that, during his recent visit to Hong Kong, China’s
Vice-Premier Li Keqiang had announced new initiatives, such as allowing investments
in the Mainland equity market through the RMB Qualified Foreign Institutional
Investor scheme, and the launch of an exchange-traded fund with underlying Hong
Kong stocks on the Mainland.
He was sure that these measures would not only facilitate the development
of Hong Kong as an offshore RMB centre, but also help promote the growth of
the SAR's asset management industry. Hong Kong’s government will continue to
foster a favourable environment for that growth.
Tsang disclosed that, to enhance Hong Kong’s financial infrastructure,
the government is preparing legislative amendments to modernize the trust law.
It is hoped, he said, that it “will encourage more local and overseas
settlers to choose our jurisdiction as the governing law of their trusts and
administer their trusts in Hong Kong. We intend to consult the trade on a draft
Trust Law Bill in the first quarter of 2012.”
Finally, with regard to Islamic finance, he believed that: “Hong Kong
is well-suited to become a vibrant Islamic financial platform and market for
Sharia-compliant bonds. This is an opportunity we will continue to pursue. We
are working on a bill to provide a level playing field for sukuk vis-ŕ-vis
their conventional counterparts in terms of tax liabilities.”
As interest is not allowed by Sharia law, earnings on Islamic bonds are taken
as profit, which is subject to being taxed. The government is therefore looking
to introduce a bill to offer the same withholding tax exemption as is given
to normal bonds on interest paid.
He confirmed that the government aims “to conduct a second round of consultation
with major market players on the relevant details of our legislative (Islamic)
proposal in the first quarter of 2012.”