Fund management industry records strong growth in 2009

27 Jul 2010

The annual Fund Management Activities Survey (FMAS) released today by the Securities and Futures Commission (SFC) shows that the combined fund management business (Note 1) in Hong Kong rebounded strongly to $8,507 billion as at the end of 2009, representing an increase of 45.4% from 2008.

The latest survey indicates that international investors continued to use Hong Kong as the platform for investing in the region. Overseas investors contributed $5,388 billion (or 63.9%) to fund management business, excluding real estate investment trusts (REITs). Meanwhile, an increasing number of Mainland-related firms gained exposure to global investment practices via Hong Kong as a springboard.

Below is a breakdown of the performance of different market players:

• Licensed asset management and fund advisory houses continued to contribute the largest proportion of the combined asset management business, recording the biggest year-on-year increase of 50.3% in the value of their aggregate asset management and fund advisory businesses to $6,447 billion in 2009.
• Registered institutions recorded a 29.8% increase in their aggregate asset management and other private banking businesses to $1,811 billion in 2009.
• Insurance companies reported a 44.6% increase in their assets under management to $175 billion in 2009.

Some highlights of the survey include:

• Non-REIT asset management business increased by 57.1% to $5,824 billion. Of this amount, $3,577 billion worth of assets were managed in Hong Kong and 81.3% of these assets were invested in Asia.
• Other private banking business grew 31.2% to $1,688 billion in 2009.
• Fund advisory business rose 13.7% to $921 billion in 2009.
• The market capitalisation of SFC-authorised REITs expanded 60% in 2009 while Fortune REIT marked a milestone as the first REIT being dual-listed in Hong Kong and Singapore.

The report highlights the growth of the exchange-traded-fund (ETFs) market in Hong Kong and the first-time cross-listing of ETFs in Hong Kong and Taiwan. As at the end of June 2010, 62 ETFs were listed in Hong Kong. The trading volume of the ETFs increased by 12.5% year on year to an average daily turnover of $1,966 million in the first half of 2010 while market capitalisation (which excludes the gold ETF) rose 29.7% to $180 billion in the same period, making Hong Kong the second largest ETF market in Asia.

The FMAS report also notes an increasing number of Mainland-related financial institutions set up operations in Hong Kong. The total asset management and fund advisory businesses of Mainland-related companies that participated in the survey increased 70.1% in 2009 to $154.7 billion.

“The asset management industry in Hong Kong has proven its mettle in 2009. As other major markets around the world continue with their financial market reforms, we must work together with the industry to make sure that Hong Kong continues to be a quality market and a platform of choice,” said Mrs Alexa Lam, the SFC’s Deputy Chief Executive Officer and Executive Director of Policy, China and Investment Products.

“We welcome the signing of the Supplementary Memorandum of Co-operation on the expansion of the RMB trade settlement scheme on 19 July 2010 between the Hong Kong Monetary Authority and the People’s Bank of China, as this will pave the way for the launch of RMB-denominated fund products," Mrs Lam added. "The SFC will continue to work closely with the industry with a view towards achieving breakthroughs in this area. Product innovation has always been Hong Kong’s forte. We also will develop deeper ties with the financial regulators and central government agencies on the Mainland to contribute to further financial co-operation between the Mainland and Hong Kong markets.”

The report notes that the SFC has conducted and concluded a number of consultations in 2009 and 2010. In particular, the conclusion in relation to the Proposals to Enhance Protection for the Investing Public has introduced a consolidated products handbook to regulate different investment products and other new measures to enhance investor protection. With the aim towards enhancing the regulatory regime of REITs and providing better protection for minority shareholders, another conclusion was made in relation to the extension of the Codes on Takeovers and Mergers and Share Repurchases to REITs and the application of the market misconduct and disclosure of interests provisions in the Securities and Futures Ordinance (SFO) to all listed collective investment schemes.

The FMAS has been conducted annually since 1999 to help the SFC assess the industry’s state of affairs for policy setting and operations planning. This year, a total of 328 entities responded to the survey. They included 276 licensed asset management and fund advisory houses, 37 registered financial institutions and 15 insurance companies (Note 2).

End

Notes:

1. The term refers to the overall value of assets reported in the sub-sectors of asset management, fund advisory, private banking (broadly categorised as non-REIT fund management business), as well as SFC-authorised REITs.
2. Respondents fall into these categories: 1) asset management and fund advisory companies licensed under section 116 or 117 of the SFO; 2) registered institutions under section 119 of the SFO, which are authorized financial institutions as defined in section 2(1) of the Banking Ordinance; and 3) insurance companies registered under the Insurance Companies Ordinance (Chapter 41) providing long-term business.

(See appendices overleaf.)

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