This undated file photo shows Amy Lo, head and CEO of UBS Hong Kong. (PHOTO PROVIDED TO CHINA DAILY)
Chairman of the Private Wealth Management Association Amy Lo is on the show this week.
She says capital outflow is not a serious issue in Hong Kong, and the city can still maintain its international finance centre status, since the numbers show that net deposit is still on the plus side. And the Greater Bay Area development continues to provide HK an advantage, as the city is the largest renminbi offshore market with 46 percent of all the currency's offshore settlement done here. Also, she says the next term of HKSAR government top officials should strengthen relevant frameworks to attract family offices and related investment to HK.
Check out the full transcript of TVB’s Straight Talk host Dr. Eugene Chan’s interview with Ms Amy Lo.
Chan: Good evening, I'm Eugene Chan with Straight Talk. Our guest tonight is Ms Amy Lo, the chairman of the Private Wealth Management Association. She is actively involved in the development of the Hong Kong private banking industry with over 30 years of experience. Ms Lo is also head and CEO of UBS Hong Kong. Tonight, Ms Lo is here to tell us if Hong Kong is facing the risk of capital outflow. Welcome, Amy.
Lo: Thanks Eugene for having me.
Chan: Amy, you know, the last few years, Hong Kong has been through some very trying times, where social unrest in 2019. And some observers were saying that some of our money may be flowing out to other Asian markets. But luckily, in a publication by the Financial Services Development Council in 2020, Hong Kong's status as a hub is still intact. But in the last two and a half years, look at the COVID situation we have in Hong Kong and also the border travel, which is a bit cumbersome compared to other cities. There are also talks again of capital outflow from Hong Kong. Is that true?
Lo: Actually, there are no signs of any significant capital outflow from Hong Kong. Perhaps, let's look at some numbers objectively. If you look at the total deposits in Hong Kong for 2021, it grew by 4.6 percent. And you may ask, how about this year, because this year is quite a challenging year.
Lo: Actually, the total deposit still grew by 1.4 percent. So the numbers speak for themselves.
Chan: Right. So that means very reassuring words to the viewers that there isn't a real capital outflow from Hong Kong from an objective point of view. But what are your high-net worth clients doing? I mean, how are they investing their money?
Lo: Obviously, in this challenging market situation, all along we said diversification, diversification, and also proper asset allocation. As a market what we have also observed is also our clients' interest in alternative investment space, particularly, for example, some of the private market, private equity that also get good traction. But at the end of the day, it’s diversification, because volatility is definitely here to stay.
Chan: Right. You know, last week, we had Chris Hui, from the government, and previously we had Dr Rocky Tung from the Financial Services Development Council, and they both felt that they're quite confident with Hong Kong status as an international financial center, despite all the challenges. So you are from the private sector, I mean, I'm sure you know exactly what the frontlines are feeling. So what is your assessment? Is Hong Kong still a very solid financial center? Of course, we are ranked number three. But what is it in reality?
Lo: I do believe Hong Kong remains as an international finance center, as you mentioned earlier, look at the Global Financial Center Index report, we’re ranked number three, after New York and London. Also, I think Hong Kong is also very uniquely positioned to be the hub connecting China (the Chinese mainland) and the rest of the world. And because China is a big growth market, and so that's also important, and that's also partly the growth driver. So if you look at also, again objectively, look at the Hong Kong Stock Exchange, actually 43 percent of the investors are international investors. So it's also quite International. And also the fact that banks like some of the international banks, international corporates, they also have strong presence in Hong Kong plus also the investors, so I think Hong Kong is still well-positioned as an international finance center.
Chan: And we are ranked number three behind London and New York but how about Hong Kong on its own? We’re often compare with, say, Switzerland and Singapore for wealth management center, which is your forte, how are we faring compared to those two competitors?
Lo: Obviously, I think both Hong Kong, Singapore and also Switzerland, are important wealth management hubs and I still believe Hong Kong has its competitive advantage, because proximity makes a lot of difference. And that's also one of our competitive edge. And especially, we also have the Greater Bay Area behind us. Because you know, the Greater Bay Area, we're talking about 11 cities, 70 million people, plus $1.7 trillion GDP. So that's significant. And actually, what we've been talking to some of the corporates, big corporates, there’s a bit of a game changer, because in the past, when they want to go to.... when they want to penetrate into the Chinese mainland market, they will automatically naturally think of going into Beijing and Shanghai. But now with such a big market, the Greater Bay Area, Hong Kong is also at the heart of this Greater Bay Area. I think that also plays at the strength of Hong Kong. And that's why I said proximity makes a lot of difference, because within the 11 cities, it's all one hour by travel from Hong Kong.
Chan: So what you're saying is that in the last few shows, we often have to refer to Singapore, because it's been mostly mentioned in the media. So in your opinion, we are not at any risk of losing any of our work to Singapore, in a substantial way.
Lo: As I said, I think both are also important hubs. But Hong Kong certainly also has its competitive advantage. I think the other thing is also, again, you know, I like to look at some of the numbers. Hong Kong is also the biggest renminbi offshore market, and you're talking about the liquidity pool is 800 billion renminbi. And that accounted basically for 46 percent of the renminbi settlement. That's huge. Okay, so that's also something not the other centers can replicate. And also on top, you have also different kinds of connect schemes, and Wealth Management Connect, Stock Connect and Bond Connect. And so that also helped to facilitate all these kinds of activities there.
Chan: Right, Amy. Let's move on to another one of your strengths which is on wealth management, because you've been in the industry for over 30 years. After 2019, some have reported that because of the implementation of the national security legislation, some of our wealthy Chinese individuals aren't using Hong Kong as a wealth management center. Is that a fair comment?
Lo: As I said, because every year, the Private Wealth Management Association, we conduct a survey among all the member banks. We have 45 member banks, and these are all the global and local and regional banks. So clearly, one of their pertinent markets is actually, as a matter, the number one pertinent market is China, everybody saying China is the number one growth market for them. And so... one thing very interesting, perhaps you may not know, we recently also did a study about where the regional heads of wealth management are sitting, the kind of banks where the wealth regional head, and actually two thirds of the regional head of wealth management business, they are based in Hong Kong,
Chan: Right, that means Hong Kong is the place. This is it.
Lo: Hong Kong is… often I would say, when the soil is fertile, everybody wants to farm here, this is still definitely the battlefield. And as I also alluded to earlier, the proximity and also having this similar kind of cultural background, talking in the same language, certainly will be helpful. And again, if I talk to it, we've been dealing with a lot of our clients from the mainland, the investors from the mainland and what are they looking for? Three areas. One is that on the investment side, do you also have some of, not just the local but global investment opportunity, and I think that's what Hong Kong can offer. Then the other one they are looking for is obviously business because a lot of them are entrepreneurs themselves, how we can help them to grow their business, then they also look at Hong Kong, having a robust capital market opportunity that attracts them to be here. Okay. And finally, they're also looking at family succession planning, because, obviously, with the wealth they want to preserve the wealth and grow the wealth and transfer it to the next generation. Again, I think Hong Kong, having so much experience dealing with intergenerational transfer, and also multi-generational transfer of assets, we have a lot of seasoned professionals. And that's why a lot of them come to Hong Kong and ask us, also for some of the structure kind of family advisory services, I think that they again play on to our strengths.
Chan: So before we go to the break, I think people are concerned, with all the geopolitical tensions, I mean, there's a lot of pressure between the US and our Chinese mainland. Do you think... Do you feel there is less investment into China from foreign investments therefore, making Hong Kong as a financial hub less important? Do you feel that at all?
Lo: Yes, as I said, volatility definitely is here to stay, as an international finance center, you will see this kind of volatility. I think what's most important is to focus on the opportunity. That's the reason why I said, if you look at why a lot of the banks still want to invest in Hong Kong, quite a number of banks said they want to increase their headcount not elsewhere, but in the Asia Pacific region, and particularly, also still in Hong Kong, because of the growth opportunity they've been seeing.
Chan: Okay, let's take a break, and don't go away.
Chan: Welcome back. Thank you for staying with us. Amy Lo is with us tonight, and she has been talking about capital flows into Hong Kong and how Hong Kong attracts and manages that wealth. So Amy, in the first part, you have given us a very positive view that Hong Kong’s strength is still there, and it's just turbulence, it’s just part of the volatility. So I'm sure the viewers will be very much relieved. So let’s look to the future, what will be the factors that you think will keep on Hong Kong growing as an international financial centre? Which areas do you think we must put focus on?
Lo: I think a few areas. As I said, I still believe the Greater Bay Area is a very important differentiator and competitive edge for us. And along that line, it is also our kind of growth of the family office. Obviously their wealth creation and also growth organically in the region is important. But at the same time, it is how we can going to attract some of the international global family offices in US, in Europe, in other parts of the world to Hong Kong because once the family offices come, the rest of their service providers, like the asset management, the fund managers, the trust, they will come, okay.
Chan: So the benefit of family offices is multifold?
Lo: Yes, it’s multifold, and that’s the reason why actually the Private Wealth Management Association, a few years ago, we did a white paper to the government. And one of the key recommendations is also focus on the family offices. That’s the future growth.
Chan: So with the government’s input, can Hong Kong really become the family office hub?
Lo: Obviously the opportunities are definitely there because to be a family office hub, you have to be also an international finance centre that will offer all these kind of platforms, opportunities to the investor and to the family offices. And as I have said, what they are looking for is also the people, the platform, and also the offering of the services. And we have all the ingredients here in Hong Kong.
Chan: I read from InvestHK, they have set up a specialized team called the “Family Office Hong Kong” to support the set up of family offices here. So since their establishment, has the actual numbers grown since they have established?
Lo: First of all, I would like to thank the government to hear from us because that is also our recommendation in the white paper, to set up a family office liaison office, and that is exactly what they did with the setup of the team. Because that is very important because that acts as a one-stop shop for all the family offices when they come to Hong Kong, how we can facilitate the setup of the family offices, and link them to the rest of the other services, and also to the rest of the world. Because I think Hong Kong, one of the important roles is to be the super-connector there. So I think, working closely with the team, we are delivering the kind of objective, step by step.
Chan: Just now you mentioned Singapore, in one of the recent studies from a UK-based group, they are saying Singapore is being seen as more of a preferred place to go because people's concern of how Hong Kong’s handling of the pandemic. So do you think Singapore has any edge of Hong Kong, in this family office hub business?
Lo: As I said, Hong Kong and Singapore are both an important hub. And for a lot of investors, they are diversifying beyond just asset classes, but also geographic kind of region. I still believe Hong Kong has the competitive edge and also much to offer because at the end of the day, what they are looking for is also investment opportunity - where do they get the biggest investment opportunity and where the growth is coming from. So I still believe Hong Kong has lots to offer. And I've been in the industry for over 30 years, I've been also seeing quite a number of ups and downs, and interestingly Hong Kong is also very resilient. And every time it emerges even stronger. So there might be some ups and downs, but so long as we focus what are the main drivers, as I said already, first one is the GBA, the Greater Bay Area, and the family offices. Second is also ESG because I often have been telling our team, if you look at what is one agenda that no matter the government, the regulator, the corporates, the investor, are interested in, it’s the ESG sustainability. This is a mega trend, the train hasn’t left the station. So I think it's good to see the government also put in a lot of effort in positioning Hong Kong as a sustainable hub. And I think that's the future growth. And last but not the least, it’s also Hong Kong as an innovation hub. And if you look at, for example, the biotech, the fundraising, Hong Kong is the biggest in the region. And while you see a lot of the IPO activity slowing down, interestingly talking to the stock exchange, they said they have a busy pipeline. And from beginning of this year till now, we have over 30 biotech companies applying to be listed in Hong Kong. So the pipeline is there. That's why I said what we have to look at is more the opportunity, rather than some of the short-term challenges.
Chan: So Amy, you are saying that apart from our natural proximity to the mainland, which offers a great advantage, and the talents, people, professional, that we have developed over the last years, you also mentioned about the Greater Bay Area, we have the innovation, which Hong Kong, under national 14th Five-Year Plan, we will be the international innovation and technology hub. And you talked about green and sustainable finance, or sustainable ESG. Then how about the latest topic, that we actually touched on last week with Chris - it is on virtual assets, which is a very common, maybe sort of the flavor of the time. But I understand Hong Kong has a regulatory framework, since January this year. And as usual, Hong Kong framework is very strict, of very high standard. Do you feel there is enough flexibility in there for you to market the products to your clients? Because other places may not be as strict. So what do you think?
Lo: First of all, I have really seen increasing interest in virtual asset that among our kinds, that’s the high net worth and also some of the family offices, because basically they treat it as an alternative asset class. But one thing we also had to segregate is that crypto doesn’t equal to virtual asset, Crypto is just one type of the virtual assets. What most of our players, the industry players, are interested in is more the underlying blockchain technology. And as you said, we are glad that the government issued the guidance notes back in January to provide a framework, and how banks are dealing with all these activities relating to the virtual asset. And we've been giving them feedback, as a matter of fact, right now Private Wealth Management Association is preparing a position paper on the virtual asset. And I think it's important as an industry how we are going to work together with the regulator to define the framework that will allow Hong Kong to accelerate, and also to really position ourselves in an advanced blockchain kind of technology adoption. I think that is the most important part.
Chan: I think the viewers will be very happy to hear that because we need to be at the forefront.
Chan: So let’s look at some basics again. We are talking about all these trends. With the COVID travel restrictions, and also with some talents leaving Hong Kong, we had Secretary Chris here last week. And he said he has reflected to the Chief Executive the importance of a more friendly travel restriction because of the pandemic. So I'm sure you have shared that same thing too to relevant authorities. From your colleagues, how bad has these restrictions been affecting our businesses in Hong Kong? Maybe you can tell the viewers.
Lo: I think, obviously, the travel restriction has impacted many industries, and finance is of no exception. We have been also having regular dialogue with the government, with the regulators, giving them feedback, giving them suggestion. And I know that they understand our concern. Actually…
Chan: Are we heading the right direction?
Lo: Yes. I would say looking at all the efforts and also with our recommendations, they are on the right track. And I do believe that they will further relax, step by step, okay? And so I think it is important to keep that kind of dialogue ongoing because the situation keeps evolving.
Chan: As you have said, Hong Kong has very well-experienced professionals in Hong Kong that will be Hong Kong’s backbone in the financial industry. But we do hear that there are some talents have left Hong Kong. And Chris Hui was saying that the government has done some measures to retain them. So do you think the government has done enough or do you have any suggestions to them?
Lo: First of all, I would say the population fluctuation is normal and natural in any of the economies. And again, in my 30 years I’ve been also seeing this kind of ins and outs, ups and downs. But what is more promising is that because if you look at the population census report, if you look at that, it’s the quality and also the education level have actually improved. And I think what's important is also training and developing the next generation of talents. I think this is a topic I am very passionate about.
Chan: I can feel that. Amy, in the last 30 seconds of the show, as you know government officials do watch our show and they do hear your comments, and I'm sure they're very happy for you to thank them for listening to you, to have the private office concept with the investment team, helping set up of private offices. So what will be your wish list for Mr John Lee and his team from July 1st?
Lo: Our wish list will be primarily related to the opportunities I talked about earlier, and it will be on three fronts. Number one is on the GBA on the Wealth Management Connect. In order to increase the appeal, the traction, there, a wide range of all our product, increase the personal quota beyond the 1 million RMB, and also allowing, in due course, their advisory services, which plays to the strength of Hong Kong. And second, it’s the family office because while we see further room to streamline the regulation for this sophisticated family offices because they have a higher risk tolerance.
Chan: Another one?
Lo: And then the last one is talent development. So continue to invest, to develop, and attract young talents.
Chan: Right. Amy, that is all the time we have. And many thanks to Ms Amy Lo for outlining Hong Kong's continuing role as an important gateway for capital flows. That concludes our miniseries on Hong Kong’s status as an international financial centre, which has given us a positive outlook and outlined some of the challenges. Goodnight. Stay healthy and see you next time.
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