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.
- 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.
“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.
- 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.
- The Hong Kong wealth market remains highly appealing
- Key findings
- Critical success factors
2. 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
3. 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
4. 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
- Abbreviations and acronyms
- Supplementary data
- Liquid assets
- Mutual funds
- Mass affluent
- Mass market
- Exchange of information
- 2016 Global Wealth Managers Survey
- Global Wealth Model methodology
- Global Retail Investments Analytics methodology
- Exchange rates
List of Tables
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
List of Figures
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