Financial services to Hong Kong

(Last updated: 6 Jan 2012)

Trends and opportunities

The market

Hong Kong is a major international financial centre, comprising an integrated network of institutions and markets that provide a wide range of products and services to local and international customers and investors.

Hong Kong’s financial markets are characterised by a high degree of liquidity and operate under effective and transparent regulations that meet international standards.

The Government of the Hong Kong Special Administrative Region (HKSAR) abides by the principle of minimal intervention in the market and has endeavoured to provide a favourable environment for business.

Its policy of low and simple taxation allows maximum room for business initiatives and innovation. There is a strong emphasis on the rule of law and fair market. There are no barriers of access to the market by foreign businesses and no restrictions on capital flows into and out of Hong Kong. There are also no exchange controls.

Banking sector

Banks in Hong Kong engage in a wide range of retail and wholesale banking business such as deposit-taking, trade financing, corporate finance, treasury activities, precious metal trading and securities broking.

At the end of August 2011, there were 150 licensed banks, 19 restricted licence banks and 26 deposit-taking companies in Hong Kong, together with 67 local representative offices of overseas banking institutions. These institutions come from 34 countries and include 71 out of the world’s largest 100 banks. Together they operated a comprehensive network of about 1,400 local branches, excluding their principal place of business in Hong Kong.

Hong Kong has a mature and active foreign exchange market, the development of which has been stimulated by the absence of exchange controls in Hong Kong and its favourable time zone location.

Stock market

Hong Kong’s stock market was the seventh largest in the world and the third largest in Asia in terms of market capitalisation as at the end of August 2011.  Hong Kong was the most active market for initial public offering (IPO) funds raised globally in both 2009 and 2010.

A wide variety of products are traded in the stock market, ranging from ordinary shares to options, warrants, Callable Bull Bear Contracts (CBBCs), Exchange Traded Funds (ETFs), Real Estate Investment Trusts (REITs), units trusts and debt securities.

As at the end of August 2011, 1,463 companies were listed in the Stock Exchange of Hong Kong (SEHK), with a market capitalisation of HK$19,431 billion. Among them, 617 were Mainland enterprises which have together raised more than HK$3,125 billion from 1993 to the end of August 2011.

Debt market

Hong Kong’s debt market has developed into one of the most liquid markets in the region. The Central Money Markets Unit (CMU) Service, established in 1990,is operated by the HKMA to provide a clearing and custodian system for Exchange Fund Bills and Notes (EFBNs) and other private debt securities.

Insurance sector

Hong Kong is one of the most open insurance centres in the world.  In August 2011, there were 164 authorised insurers, 86 of which were incorporated in Hong Kong and the remaining 78 were incorporated in 21 countries, with Bermuda taking the lead. In recent years, Hong Kong’s insurance market has shown considerable growth. The gross premium for 2010 was about HK$205 billion.

Funds and asset management

As one of the largest asset management centres in Asia. Hong Kong continued to attract international investors to use it as the platform for investing in the region. Hong Kong's combined fund management business amounted to HK$10,091 billion as at the end of 2010, representing a growth of 18.6 per cent over 2009. Hong Kong is also the regional centre for portfolio management activity, including Hong Kong authorised unit trusts and mutual funds and, on a larger scale, institutional fund management. As at March 31, 2011, there were 1,944 authorised unit trusts and mutual funds in Hong Kong. The net asset value of these authorised unit trusts and mutual funds as at December 31, 2010 totalled around HK$9,237 billion.

Opportunities

Financial services opportunities exist for the following categories:

Fund management. The depth and breadth of investment funds managed in Hong Kong has increased notably in recently years. A broad range of investment products, ranging from low-risk bond or money market funds to more sophisticated REITs and hedge funds products, are available in Hong Kong. The implementation of the MPF scheme has helped boost Hong Kong's fund industry as fund managers are attracted by the ample supply of funds. Australian fund management companies (with licenses registered in Hong Kong) can offer fund management services in the Hong Kong market.

Wealth management. Although banks currently share only a small portion of the fund management business in Hong Kong, they are becoming more involved in developing their wealth management and asset management businesses. Australian financial services companies that have been licensed in Hong Kong can offer wealth management advisory services in the Hong Kong market.

Consulting and training services. Australian financial services companies are well placed to capture opportunities in financial services consulting and corporate training due to the large number of international and local financial institutions that have offices in Hong Kong.

Tariffs, regulations and customs

In line with international trends, Hong Kong’s financial services regulatory system has evolved and developed over the years. The principal regulators below are responsible for regulation of the banking, securities and futures, insurance and retirement scheme industries respectively.

Hong Kong Monetary Authority (HKMA)

Besides banking supervision, other functions and objectives of the HKMA include the maintenance of currency stability and promotion of the efficiency, integrity and development of the financial system. These functions and objectives are generally consistent with those of central banks around the world.

The government is not involved in the day-to-day regulation of the securities and futures industry. The SFC is an autonomous statutory body responsible for administering the laws governing the securities and futures markets in Hong Kong and facilitating and encouraging the development of these markets. It seeks to maintain and promote the fairness, efficiency, competitiveness, transparency and orderliness of the securities and futures industry and to provide protection for investors.

Securities and Futures Commission (SFC)

Within the regulatory framework, the SFC has regulatory oversight of the HKEx and its subsidiaries, namely the SEHK, the HKFE and three recognised clearing houses. The government may act as a facilitator and co-ordinator of market reforms pursued by the SFC and the HKEx where necessary.

Office of the Commissioner of Insurance (OCI)

Established as an office within the government structure, OCI administers the legislation governing the operation of insurance companies and insurance intermediaries in Hong Kong. The Commissioner of Insurance, who is appointed the Insurance Authority (IA), exercises prudential supervision of the insurance industry with a view to protecting the interests of policy holders.

Self-regulatory measures to strengthen professional discipline in the insurance market are also formulated by the insurance industry in consultation with the IA. Under the Insurance Intermediaries Quality Assurance Scheme initiated by the IA, insurance intermediaries are now required to pass a qualifying examination before they can practise.

Mandatory Provident Fund Schemes Authority (MPFA)

The MPFA was established in September 1998 as an autonomous, statutory body to regulate, supervise and monitor the operation of the MPF System.

Marketing your products and services

Market entry

The most effective market entry strategies for the Hong Kong financial services market include:

Establishing an office in Hong Kong directly or through a representative agent. The advantage of working with a local agent or partner is the local experience, contacts and knowledge that they can provide. On the other hand, the Australian partner can add value through their international experience and knowledge of the Australian market.

Financial services institutions should always do their research before selecting an agent. When looking for an agent in Hong Kong, it is advisable to research the agent's:

• Corporate structure
• History
• Management background information
• Track record in recruiting students
• Reputation
• Financial status
• Public filings

Participating in financial services events in Hong Kong to promote your services directly:

Asian Financial Forum
16-17 January 2012
Hong Kong Convention and Exhibition Centre, Hong Kong
Web: www.asianfinancialforum.com

Links and industry contacts

Financial services–related resources

Hong Kong Institute of Bankers (HKIB) – www.hkib.org
The HKIB has been serving the local banking community in the provision of education and training since 1963. In 1995, with the encouragement and support of the local banking community, the Institute declared its independence from its parent institute in UK. With this independent status, the Institute is able to better serve the training needs of bankers in the region and to reflect the importance of Hong Kong as an international financial centre.

Hong Kong Investment Funds Association (HKIFA) – www.hkifa.org.hk
The HKIFA is a non-profit-making industry organisation that represents the fund management industry of Hong Kong. Its mission is to: maintain Hong Kong’s competitiveness as the major fund management centre in Asia, to foster the development of the fund management industry in Hong Kong, and to enhance the professional standards of the industry to ensure that they are in line with international best practice.

Hong Kong Securities Institute (HKSI) – www.hksi.org
The HKSI was officially formed in 1997 as a professional body to raise the standards of securities and finance practitioners in Hong Kong. The HKSI provides continuous professional development by offering comprehensive examinations and an extensive program of training courses and events.

Hong Kong Stockbrokers Association Ltd (HKSbA) – www.hksa.com.hk
The HKSbA is a non-profit making industry association founded in 1978. Currently, HKSbA has over 1,300 members from some 350 brokerage firms, representing more than 70 per cent of the stockbroking business community.

Institute of Financial Planners of Hong Kong – www.ifphk.org
The Institute’s goals are to promote the Certified Financial Planner certification as the standard for financial planning, to reinforce and uphold professional standards in financial planning, and to represent the top practitioners in the financial planning industry in Hong Kong and Macao.

The Hong Kong Association of Banks – www.hkab.org.hk
The major roles of the Hong Kong Association of Banks are: to promote the interests of fully licensed banks in Hong Kong; and to make rules for the conduct of banking business in consultation with the Financial Secretary.

The Hong Kong Capital Markets Association (HKCMA)– www.hkcma.org
Established in 1986, the HKCMA is an industry association founded by a group of financial institutions active in the Hong Kong market to help promote the development of local and regional debt capital markets.

Government, business and trade resources for Hong Kong

Hong Kong SAR Government – www.gov.hk
Australian Consulate General – www.hongkong.china.embassy.gov.au
Australian Chamber of Commerce of Hong Kong – www.austcham.com.hk

Media

South China Morning Post – www.scmp.com – Major English language newspaper. A special financial supplement is available.
Hong Kong Economic Times – www.hket.com/eti – Major Chinese language financial newspaper
Hong Kong Economic Journal – www.hkej.com – Major Chinese language financial newspaper

Sources

• Government of Hong Kong SAR
• Hong Kong Trade Development Council