Wealth in Hong Kong: Sizing the Market Opportunity 2017

Wealth in Hong Kong: Sizing the Market Opportunity 2017


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Executive Summary

Almost 60% of the Hong Kong adult population is considered affluent, comparable to markets in the developed West like Switzerland, while wealth growth rates still resemble those found in emerging markets. Growth going forward will be moderated by weaker economic performance in China, but with the wealthiest individuals' (those holding more than $10m in liquid assets) wealth forecast to achieve a compound annual growth rate (CAGR) of 10.24% over the years to 2020, Hong Kong retains much of its allure as a source of new clients for wealth managers.

Key Findings

Affluent individuals constituted almost 60% of the total adult population in Hong Kong at the end of 2016, making it a very attractive market for wealth managers. HNW individuals accounted for 1.72% of the population.

Retail savings and investments are dominated by deposits, and this trend is not expected to change.

Despite the strong bias of Hong Kong investors towards deposits, a positive growth outlook is forecast for all asset classes over 2017-20.

Investments in non-traditional asset classes are on the rise in the HNW segment, and they currently constitute 16% of the typical Hong Kong HNW investor's portfolio, with real estate investment trusts (REITs) being the leading driver of this growth.

50% of Hong Kong HNW wealth is booked offshore, mostly in the US. Better investment options and returns are the main drivers for investing offshore.

Synopsis

GlobalData's "Wealth in Hong Kong: Sizing the Market Opportunity 2017" analyzes the Hong Kong 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 number of individuals and the 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.

Examines the tax landscape in Hong Kong and future implications for investors.

Reasons to Buy

Benchmark your share of the Hong Kong wealth market against the current market size.

Forecast your future growth prospects using our projections for the market to 2020.

Identify your most promising client segment by analyzing penetration of affluent individuals in Hong Kong.

Evaluate your HNW proposition by understanding how Hong Kong's tax system impacts HNW clients.

Review your offshore strategy by identifying HNW motivations for offshore investments and their preferred booking centers.



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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 remains a leading offshore center

After a step back in 2015, mutual fund holdings will experience growth from 2017 onwards

Retail and institutional investors share Hong Kong offshore deposits market holdings

The onshore wealth market will continue to grow at a reduced rate

In Hong Kong, HNW individuals represent 1.72% of the total adult population

Affluent individuals hold 93.18% of total liquid assets in Hong Kong

DRIVERS OF GROWTH IN THE HONG KONG WEALTH MARKET

Hong Kong's retail investment market will perform strongly over the forecast period

Retail savings and investments growth will continue to support wealth creation

Investors in Hong Kong are strongly biased towards deposits

Positive growth is forecast for all asset classes over 2016-20

Deposit growth will continue to outstrip GDP growth

2017 will see off challenges to Hong Kong's economy

Interest rates will rise, but gains will be low once inflation is factored in

Bond holding growth will match average wage growth through 2017-20

The Government Bond Programme will stimulate further 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 disappointing stock market performance, equity and mutual fund holdings experienced strong growth

HNW INVESTMENT PREFERENCES

Investments in alternatives are on the rise

Price appreciation is the main driver for investments in property

REITs are leading the increase in alternative investments

Half of Hong Kong HNW assets are held offshore

Wealth managers should improve their international operations services

Access to better investment options and the expectation of better returns overseas are the biggest drivers of offshore investment

Tax efficiency is no longer a main driver for offshoring wealth

The largest share of Hong Kong's HNW offshore wealth is booked in the US

APPENDIX

Abbreviations and acronyms

Supplementary data

Definitions

Affluent

Domicile

DTC

FATCA

HNW

Liquid assets

Bonds

Cash

Deposits

Equities

Mutual funds

Mass affluent

Mass market

Onshore

Residency

Exchange of information

TIEAs

Methodology

2016 Global Wealth Managers Survey

GlobalData's Global Wealth Model methodology

Global Retail Investments Analytics methodology

Exchange rates

Bibliography

Further reading

About GlobalData

Disclaimer

Figure 1: Retail non-resident holdings amounted to $178bn at the end of 2015

Figure 2: Non-resident retail offshore deposits constitute an ever-growing element of the Hong Kong market

Figure 3: Almost 60% of Hong Kong's population can be considered affluent

Figure 4: HNW and mass affluent individuals hold 93.18% of total Hong Kong liquid assets

Figure 5: Hong Kong's retail savings and investments will grow at a stable rate

Figure 6: Deposits dominate the Hong Kong retail wealth market

Figure 7: Deposits will continue to drive growth up to 2020

Figure 8: Deposit holdings growth is forecast to significantly exceed GDP growth

Figure 9: Bond holdings are forecast to experience moderate but stable growth

Figure 10: The performance of the local stock market has been weak in recent years

Figure 11: Direct equity investment growth rates experienced a notable decrease in 2015 and are forecast to remain low

Figure 12: REITs dominate investments in property

Figure 13: HNW individuals in Hong Kong currently hold 50.4% of their assets offshore

Figure 14: Access to better investment options is the biggest motivation for offshore investment

Figure 15: The US, the UK, and China are the go-to markets for offshoring wealth

Figure 16: Hong Kong has signed a range of DTCs and TIEAs

Table 1: Net chargeable income tax rates in Hong Kong, 2009-10 to 2016-17

Table 2: Standard tax rate scenarios, 2016-17

Table 3: AVD rates

Table 4: Stamp duty as per property lease

Table 5: Stamp duty on transfer of Hong Kong stock

Table 6: Total Hong Kong adult population by asset band (000s), 2011-15

Table 7: Total Hong Kong adult population by asset band (000s), 2016e-20f

Table 8: Total Hong Kong onshore liquid wealth segmented by asset band ($bn), 2011-15

Table 9: Total Hong Kong onshore liquid wealth segmented by asset band ($bn), 2016e-20f

Table 10: Hong Kong dollar-US dollar exchange rate, December 31,2015 and December 31, 2016

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private banking, wealth management, Hong Kong, China, investments, savings, HNW, offshore, mass affluent, mutual funds, FATCA, AEOI, CRS, bonds, deposits, Asia Pacific

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