Funds versus equity wealth management products: Investors diverge

Credit: HelloRF

Funds are the preferred investment choice among eligible Chinese mainland investors in the cross-boundary Wealth Management Connect scheme, while Hong Kong and Macau residents generally picked equity wealth management products, a recent HSBC survey found.

The Wealth Management Connect program, launched in October, enables mainland residents of nine Guangdong cities in the Guangdong-Hong Kong-Macau Greater Bay Area (GBA) to invest in investment products sold by banks in Hong Kong and Macau via the "southbound link" and vice versa.

By surveying around 2,300 people living in the Greater Bay Area who have at least 1 million in local currency of liquid assets, HSBC finds that a majority of southbound (91 percent) and northbound (76 percent) respondents said they are interested in participating in the scheme.

For southbound respondents interested in the scheme, over 80 percent showed interest in funds, compared to other eligible products such as HK dollar deposits, bonds, and foreign currency deposits.

Equity wealth management products ranked at the top for northbound respondents, followed by public fixed income wealth management products and public securities investment funds.

Interestingly, while the scheme provides a new channel for investors to diversify and globalize their investment portfolio, over half of the southbound respondents expressed interest in funds with China exposure, significantly higher than Asia and global market investors.

The survey also highlighted that brand image is the most common criteria for southbound investors when choosing the bank for the service, followed by product variety and a user-friendly digital channel.

For northbound investors, the top focal points are service charge, brand image, and return on investment.

When asked about expected annual return on investment, over half of southbound investors and 44 percent of northbound investors were looking for a 7 to 9 percent yield.