Chinese mainland savers rush to Hong Kong to capitalise on higher returns, less risk
HONG KONG has become a hot destination for Chinese mainlanders to park their money as a turbulent onshore capital market has led many to hunt for lower-risk investments overseas.
Hong Kong recorded almost 8 million visits from the mainland in the first five months of this year, up from fewer than 30,000 in the same period in 2022. The border between the two regions fully reopened earlier this year.
Many visited for more than shopping or sightseeing, seeking to sock their money away in insurance policies and savings accounts in the financial hub, sources who work in Hong Kong’s wealth management industry told Caixin.
More and more mainland tourists have been seeking investment opportunities in the city as the mainland capital market has remained jittery in the wake of a rout in 2022 and amid a patchy economic recovery this year. On the mainland, returns on investments such as deposits and wealth management products have remained poor.
While many banks on the mainland have slashed savings interest rates in a bid to cut costs and boost profits, rates in Hong Kong have been going up as the region’s de facto central bank has kept rates in lockstep with the US Federal Reserve’s hikes.
Recently, the annual interest rates on Hong Kong dollar fixed-term deposits exceeded 4 per cent at more than 10 banks in the city. In contrast, the annual rates on yuan deposits on the mainland have rarely exceeded 3 per cent lately.
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US dollar deposits in Hong Kong might also serve as an attractive lure. Mainland savers can earn 5 per cent or more in annualised interest at some banks on three-month fixed-term deposits.
In the first four months, the number of new cross-border bank accounts set up at Bank of China (Hong Kong) was six times that during the same period last year, and the majority of them were set up for mainland customers, the bank told Caixin.
Some banks, such as HSBC, have extended the hours of certain branches in the city to accommodate mainland customers, who tend to show up on weekends.
Mainland visitors are also parking money in insurance. The premiums they paid into new policies in Hong Kong over the first three months of 2023 surged by almost 28 times from the same period last year to HK$9.6 billion (S$1.63 billion), the city’s Insurance Authority said, citing the release of pent-up demand and a relatively low base of comparison. Still, the figure is smaller than the HK$12.8 billion from the first quarter of 2019, the year before the pandemic started.
In the first quarter of this year, more than 60 per cent of Prudential Hong Kong’s mainland customers bought savings insurance products, especially those that allow them to exchange their savings into different currencies, said Priscilla Ng, the company’s chief marketing and partnership distribution officer.
About 50 per cent to 60 per cent of the customers opted for health insurance for critical illnesses or medical needs, and some bought both savings and health insurance policies.
Prudential Hong Kong is planning to hire more wealth management advisers, and expecting its income from premiums paid by mainland visitors this year to return to 2019 levels, she told Caixin.
Mainland customers have recently come to favor low-risk wealth management products, such as deposits, bonds and life insurance plans, and tend to arrive in Hong Kong with clear investment strategies in mind, sources in the banking and wealth management industry said.
After the volatility in the onshore stock, bond and foreign exchange markets in 2022 and early 2023, mainland investors are increasingly concerned about the importance of asset diversification, said Sally Liu, deputy general manager of the personal banking and wealth management department at Bank of China (Hong Kong).
Instead of purchasing a single product, mainland customers are allocating their assets more comprehensively to better balance risk and returns, Liu told Caixin. CAIXIN GLOBAL
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