The outlook for client asset growth amongst Hong Kong’s private wealth managers has deteriorated in 2022, according to a survey by an industry body, despite a record year for net inflows.

There is less optimism about the future of wealth management in Hong Kong this year, according to a report jointly authored by the Private Wealth Management Association (PWMA) and KPMG China.

The percentage of respondents that forecast moderated growth of 0-5 percent (8 percent, up 2 percentage points) and 5-10 percent (67 percent, up 9 percentage points) rose compared to greater growth rates of 11-20 percent (22 percent, down 8 percentage points) and 21 percent or more (3 percent, down 3 percentage points).

This was despite a record year for net fund inflows which totalled HK$638 billion ($81.3 billion) in 2021, according to regulator data, though assets under management (AUM) fell 6 percent to HK$10.6 trillion due to market movements. 

China Market

Unsurprisingly, further penetration of the mainland China market was seen as the top growth driver moving forward, according to respondents. Currently, mainland Chinese clients account for 38 percent of Hong Kong private wealth managers’ total AUM and the figure is expected to rise to 49 percent by 2027.

Within China, 86 percent see the development of the Greater Bay Area – an 11-city megalopolis with over 80 million people – as either being «very important» or «important» to their offshore business in Hong Kong. The so-called «Wealth Management Connect» scheme was launched in September last year to enable this cross-border access and respondents said that «increased quota size or freer conversion of funds» is at the top of their wish list to make the scheme more relevant to the industry.  

In addition to China, respondents also underlined other markets such as second or third generation clients, family offices, young entrepreneurs and offshore clients as leading growth drivers.

Zero-Covid, Regulations

In terms of constraints to industry growth, respondents named Covid-linked travel restrictions (81 percent) and a challenging regulatory environment (81 percent) as the two top challenges. 

Tied for second place at 56 percent is concerns about the political situation in Hong Kong and the limited private banking talent pool.

The report is based on a survey of 36 out of the 42 PWMA member institutions and 200 of their clients alongside interviews with industry executives, regulators and other stakeholders. The surveys and interviews were conducted from June to August this year.