Business Focus

Launch of the cross-boundary Wealth Management Connect Scheme in the Greater Bay Area

By Bonn Liu, Partner, Head of Asset Management, ASPAC; Head of Financial Services, Hong Kong, KPMG China & Vivian Chui, Partner, Head of Securities & Asset Management, Hong Kong, KPMG China

The Wealth Management Connect Scheme is an initiative that was jointly announced by the People’s Bank of China, the Hong Kong Monetary Authority and the Monetary Authority of Macao. It aims to facilitate the seamless delivery of financial services in the Greater Bay Area (GBA), by promoting investment diversification and facilitating the flow of capital in the GBA, and strengthening Hong Kong’s status as an international financial centre.

The GBA has a combined GDP of USD 1.6 trillion representing a significant growth opportunity for financial institutions. The growing wealth of mainland Chinese residents is leading to increasing demand for investment diversification to offshore assets; also, increasingly active northbound trading through Stock Connect and Bond Connect indicates that investors in Hong Kong are interested in mainland China’s capital markets.

Furthermore, in August 2019, the stock exchanges in Hong Kong, Shanghai and Shenzhen agreed on the criteria for including Hong Kong-listed stocks with weighted voting rights in the Stock Connect schemes, and this has led to an increase in trading volumes. Under Wealth Management Connect, cross-boundary remittance will be carried out in RMB. Cross-boundary remittance will also be conducted and managed in a closed-loop through the bundling of designated remittance and investment accounts. Through this mechanism, residents of the mainland Chinese cities in the GBA can directly use RMB to invest in eligible investment products distributed by banks in Hong Kong and Macao, and residents in Hong Kong and Macao can use offshore RMB to invest in eligible RMB-denominated assets distributed by mainland Chinese banks in the GBA. The consequence will be the strengthening of Hong Kong’s position as a global offshore RMB hub. Wealth Management Connect is expected to provide investors with greater product diversity and asset allocation options, while also raising the bar for financial institutions in terms of product design, service quality and risk management. The regulatory authorities will introduce measures and establish robust mechanisms for regulatory cooperation, communication and coordination in order to protect the interests of investors. processes must meet the regulatory requirements in all three regions. • The design of the wealth management products (WMPs) must consider the risk tolerance of investors and whether they are qualified investors. • Before selling WMPs, sales agencies must clearly explain to investors the risk management measures, relevant laws and regulations, and relevant provisions for the protection of investors’ rights and interests for WMPs in the different regions in the GBA. • Establish and improve their risk management systems to enhance the timeliness and efficiency of risk alerts and reduce their risk levels.

Wealth Management Connect is expected to drive greater product innovation, and may attract more international financial institutions to set up or expand their presence in Hong Kong and the other GBA cities to capitalise on these opportunities. This will likely spur more competition in the region, which should raise the bar for product diversity and quality, and

robust risk management.

KPMG China is based in 27 offices across 25 cities with around 12,000 partners and staff in Beijing, Changsha, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Haikou, Hangzhou, Hefei, Jinan, Nanjing, Ningbo, Qingdao, Shanghai, Shenyang, Shenzhen, Suzhou, Tianjin, Wuhan, Xiamen, Xi’an, Zhengzhou, Hong Kong SAR and Macau SAR. Working collaboratively across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located. KPMG is a global organisation of independent professional services firms providing Audit, Tax and Advisory services. We operate in 147 countries and territories and have more than 219,000 people working in member firms around the world. The independent member firms of the KPMG global organisation are affiliated with KPMG International Limited (“KPMG International”), a private English company limited by guarantee. KPMG International and its related entities do not provide services to clients. Each KPMG firm is a legally distinct and separate entity and describes itself as such. In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong firm can trace its origins to 1945. This early commitment to this market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in KPMG’s appointment for multi-disciplinary services (including audit, tax and advisory) by some of China’s most prestigious companies.

Payments in Emerging SEA Markets

By Bertrand Theaud, Founder, Statrys

With SEA markets rapidly developing, businesses in these areas are also adopting in the early stages of digitalization to catch up with the market threats brought by the COVID-19 pandemic.

In fact, according to the Future of Fintech in Southeast Asia, foreign investment in SEA fintech companies has grown 7 times over the past 5 years. This provides tremendous growth opportunities for the Fintech industry in these areas, as well as develop longer lifetime-value with customers who are inevitably early adopters.

Statrys’ insights on the major market disruption emerging amid COVID-19

With the current US-China trade war, the landscape of the global business world is shifting with the trend of global trading repositioning in the area. Despite the fact that an increasing number of manufacturers are relocating to SEA countries, Chinese companies are still willing to reach out and trade with these businesses. An obvious way for these companies to conduct business together is by starting with the central trading hub - Hong Kong.

The COVID-19 pandemic is already accelerating the shift of this global trading scene. With global trade slowed, businesses need to prepare for this sudden change in the market. Businesses are restructuring their logistical networks and moving their manufacturing-base closer to the consumers as a more cost-effective solution. Consequently, products produced in Asia will be more likely to be consumed back in Asia. This trend of local production and consumption is constituting an increase in payment volume.

Statrys’ engagement with the advanced markets of Hong Kong and Singapore

Compared to the West, markets including Asia, South Asia, and South East Asia tend to have a trend of family-based business styles. These companies are traditionally run by family members and not by people working in similar fields or in a way that shares similar skills like other Western businesses do.

Personal connections also play a role in the vendor-customer relationship. Although it is less so the case for developed Asian markets like Hong Kong or Singapore, most business accounts in these developed markets are still run by family-oriented entrepreneurs compared to their western counterparts. Hong Kong acts as a great collection point for these small family businesses in Asia since it provides relatively quick and easy business accounting and access to global trade networks. However, problems also arise accordingly with this family business style. With understaffed accounting and unstructured finances, information such as banking details and access to financial resources become impossible to acquire from these companies. This will also prevent them from opening business accounts easily.

These businesses often trade with their neighboring countries or in the West. This is where Fintech steps in with services like forex (in which Statrys also provide) will become necessary in helping SMEs in these Asian markets reach their intended markets easily.

Although we are not operating locally in those neighborhood markets yet, we will soon extend our market coverage to these regions.

Conclusion

The South Eastern Asia area has shown promising signs in adopting and implementing Fintech, even if Fintech in these regions remains in its early days.

How Financial regulations around Fintech are ready to be eased as quickly as the demand is increasing remains the only ‘challenge’ to make the change happening.

Despite this, Statrys is optimistic towards the market outlook in the future.

Founded in 2018 in Hong Kong, Statrys began with the ambition to support SMEs and start-ups beyond borders with a smarter way to make payments. Statrys aims to unlock access to modern payment solutions by offering comprehensive services ranging from multi-currency business accounts, domestic & international payments, and direct market access to foreign exchange. With Statrys, SMEs and Start-ups can open their business account within 48 hours and start dealing in 11 currencies. Companies can also minimize financial loss with Statrys’s competitive currency exchange rates and Forex exposure hedging. The Statrys payment platform leverages digital innovations to provide frictionless client experiences for routine transactions and superior client support for complex operations, as well as superb customer support when challenges arise.

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