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Hong Kong Asset Management Reaches Another Record Level

by Mary Swire, Lowtax.net, Hong Kong
22 July, 2015

The Securities and Futures Commission (SFC) has released its annual survey, which showed the combined fund management business in Hong Kong sustaining another year-on-year increase to reach a record high at the end of 2014 of almost HKD17.7 trillion (USD2.3 trillion), up 10.5 percent.

The survey's findings indicate that Hong Kong remained a preferred platform for international investors, who contributed an historic high of HKD12.4 trillion and accounted for 71 percent of the fund management business. Assets managed in Hong Kong increased by nearly 18 percent to a record level of HKD6.85 trillion.

"The latest survey underscored the trend of sustained growth in assets managed in Hong Kong, driven by our role as an intermediary for capital between the Mainland financial markets and the rest of the world," said Julia Leung, the SFC's Executive Director of Investment Products.

All market players recorded a strong performance during 2014. The aggregate business of licensed asset management and fund advisory corporations amounted to HKD12.9 trillion at the end of 2014, up 9.6 percent and once again representing the largest proportion of the combined asset management business.

Registered financial institutions recorded an 11.6 percent increase in their aggregate asset management and other private banking businesses, which reached HKD4.1 trillion. Insurance companies reported a 24.2 percent increase in their assets under management to HKD452bn.

Leung added that "the launch of the Mainland-Hong Kong Mutual Recognition of Funds scheme on July 1 will further encourage growth in this area and promote Hong Kong as a fund domicile and investment management center." That scheme has established new rules allowing investment funds domiciled in Hong Kong and China to be sold in one another's market.

As yet there has been no confirmation of the Chinese tax implications of non-residents getting income from a Chinese fund recognized by the SFC, but it has been suggested that, given the favorable tax arrangements already established for the Shanghai-Hong Kong Stock Connect program, China's tax regime will not have a negative impact on mutual fund recognition.

The signing of the fourth Protocol to the China-Hong Kong double taxation agreement earlier this year confirmed that gains derived by a Hong Kong resident from the sale and purchase of shares in a Mainland-listed company will be taxable only in Hong Kong (where there is no such tax).

Hong Kong's Secretary for Financial Services and the Treasury K C Chan has also previously stressed that the Government is proactively "developing Hong Kong into a full-fledged fund and asset management service center" with the help of various tax incentives to encourage the fund management industry to Hong Kong.

Those incentives include a current proposal to introduce a new open-ended fund company structure to attract more funds to domicile in Hong Kong, and an extension of the profits tax exemption for offshore funds to private equity funds that was put into effect earlier this month.

The SFC survey has been conducted annually since 1999 to help assess the state of the industry for policy and operational planning. This year, a total of 587 institutions responded to the survey on a voluntary basis. They included 519 licensed asset management and fund advisory corporations, 47 registered financial institutions and 21 insurance companies.

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