From left to right, Mr Darryl Chan, Deputy Chief Executive, Hong Kong Monetary Authority ; Ms Julia Leung, Chief Executive Officer of Securities and Futures Commission ; Ms Amy Lo, Chairman of Global Wealth Management Asia, Head and Chief Executive, UBS Hong Kong ; Mr Nicolas Moreau, Global Chief Executive Officer, HSBC Asset Management ; Ms Harshika Patel, Asia Chief Executive Officer, J.P. Morgan Private Bank & Hong Kong Chief Executive Officer, J.P. Morgan, attend and speaks at the Panel Discussion on Asset and Wealth Management : Creating Opportunities through  Collaboration in the Asian Financial Forum at Hong Kong Convention and Exhibition Centre in Wan Chai on Jan 24, 2024. (CALVIN NG /CHINA DAILY)

The wealth management sector should further diversify the range of financial products offered under the Cross-boundary Wealth Management Connect program and strengthen regulatory cooperation to mitigate potential financial risks.

Regulators and business leaders made the remarks at a panel discussion on asset and wealth management at the 17th edition of the Asian Financial Forum, which kicked off on Wednesday.

Over the next 40 years, an estimated $22 trillion in assets is expected to be transferred from one generation to the next in Asia, underscoring the region’s need for wealth management services

Julia Leung Fung-yee, CEO of the Securities and Futures Commission, Hong Kong's financial market regulator, said there is a need to carefully manage foreign capital flowing through Hong Kong into the Chinese mainland in order to mitigate substantial risks across various markets. She cited differences in levels of market openness — the mainland’s not being fully open and Hong Kong’s being completely open.

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“Building a resilient regulatory framework for programs like the Cross-boundary Wealth Management Connect is critical. This includes setting quotas to control capital flows and ensuring foreign investors abide by local market rules,” she said.

Leung said the scalability of such a cross-border program is vital. “When it has achieved a certain degree of success, then you move on to expand”.

She highlighted the significance of supervisory cooperation among regulators, government bodies and the private sector. This approach forms the foundation of Hong Kong’s strategy in navigating the complexities of cross-boundary financial regulation.

The wealth management connect, launched in 2021, saw its latest expansion last year to encompass a wider range of traded products and updated eligibility criteria, allowing more investors and brokerages to participate in the program.

It allows Hong Kong and Macao residents to invest in onshore investment products through banks in the Guangdong- Hong Kong-Macao Greater Bay Area, while residents of nine cities in Guangdong province can invest in Hong Kong and Macao wealth products through local lending institutions. As of the end of August, about 59,000 individual investors had participated in the program.

Hailing that the enhancement of the connect has provided greater flexibility, convenience, and investment options for investors, Amy Lo, head and chief executive of UBS Hong Kong, called for raising the individual investment cap to a minimum of $1 million, from the current 3 million yuan ($419,760).

This change would offer greater investment opportunities for individual investors, bolstering Hong Kong's appeal as a wealth management center, she said.

“Hong Kong’s competitive edge is seen in its low-tax regime and leadership in asset management and hedge funds in Asia,” Lo said. “Over the next 40 years, an estimated $22 trillion in assets is expected to be transferred from one generation to the next in Asia, underscoring the region’s need for wealth management services.”

However, the sector is going to face headwinds in the future as geopolitical uncertainty and an economic slowdown will lead to increased risk aversion among investors, cautioned Nicolas Moreau, global chief executive officer of HSBC Asset Management.

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“Investors are increasingly considering fixed income as a low-risk option for returns, indicating a shift in investment strategy toward more secure assets,” he said.

Contact the writer at tianyuanzhang@chinadailyhk.com