WM Market Reports
Hong Kong Will Take Switzerland's IFC Crown By 2025/6 – Study
Pinpointing a number of banks' prospects, the report examined how Hong Kong's future appears as a cross-border centre, and predicts that the city will become number one as an IFC in a year or two.
Hong Kong’s private wealth assets under management could nearly
double to $2.3 trillion by 2030, as China’s growing affluence
increases investment through the city’s cross-border financial
infrastructure, even with China's strict controls on capital
flows, according to Bloomberg Intelligence.
Hong Kong’s family office lead over Singapore is set to widen as
it overtakes Switzerland as the world’s top cross-border wealth
centre as early as next year in 2025, the report said. Banks such
as HSBC, Standard
Chartered, BOCHK and
DBS may win a bigger share
of net new money in Asia than global peers like UBS.
Predictions that Hong Kong – recovering from the pandemic
lockdowns and political changes – could overtake Switzerland (see
chart below) as the world’s largest offshore/cross-border wealth
hub are not new. In 2022, Boston
Consulting Group made such a forecast. (In BCG’s
latest wealth market report, it put Hong Kong in second place
behind Switzerland.)
The report, called Hong Kong’s Wealth Management
Outlook, comes at a time when, as
reported here, Hong Kong has been pushing to raise its
profile as a centre for family offices and private market
investments, among others. This puts makes it a
competitor with Dubai, Singapore, Switzerland and
London.
In other details of the Bloomberg Intelligence report, it showed
that Chinese demand for higher-yielding offshore investments
could rise 16 per cent a year through 2030, with US and Hong Kong
interest rates likely to remain higher than in mainland
China beyond 2027, as based on market expectations.
The 50-page report said Hong Kong’s private wealth management
industry should benefit from cross-border inflows as well as
local households’ rising affluence.
Several milestones are flagged in the report, starting in
November this year, in which the report said that monthly data on
southbound capital markets/funds activity from the mainland to
Hong Kong will show “strong demand for offshore investments”; in
the first quarter of 2025, there could be
regular “enhancements” to cross-border market access
programmes; and in January, geopolitical risks for Hong Kong’s
financial centre status could be put in the spotlight as a new US
administration takes office. And in 2025/26, Hong Kong will
overtake Switzerland as the world’s largest cross-border wealth
hub, according to the report’s estimation.
Effects on banks
Examining how specific banks and other financial institutions
will be affected by these trends, the study made the following
observations:
“HSBC’s dominance in Hong Kong remains a powerful lever to wealth
growth. Hong Kong contributed 54 per cent of the $5.4 billion in
group wealth and personal banking’s international revenue in H1
[first half of 2024]. New customers reached 345,000 in Hong Kong,
77 per cent more than in H1 23. Private banking AuM reached $209
billion in Asia.”
Standard Chartered: The report said the bank could achieve a 12
per cent return on tangible equity guidance for 2026. “The wealth
business is a key growth driver and a timely cost refocus
critical [to] keeping 2024-26 operating jaws positive,” it
said. ("Jaws", in this case, is defined as the difference
between the rate of growth in underlying net operating income and
underlying operating expenses.)
The bank’s investment in wealth management helped its AuM
reach $294 billion in the second quarter, making it Asia’s
third-largest wealth manager. Some $23 billion in net new money
year-to-date equates to 16 per cent annualised growth. “The
bank’s Asia footprint should help capture cross-border flows in
the region and deliver or even exceed its 2026 wealth management
growth targets.”
BOC Hong Kong: The report said this bank’s earnings growth could
reach double digits in 2024 after finishing the first half of the
year with a rise of 18 per cent. BOC Hong Kong is the
second-largest bank in the city, second to HSBC. “Its Greater Bay
Area customer base surged 70 per cent last year, with Wealth
Connect customers up 80 per cent.” The study estimates that
private banking AuM stands around $50 billion.
DBS: the study said the Singapore-headquartered bank’s fee income
could rise through 2025 as it continues to build private banking
and family office offerings. DBS’s wealth business had S$396
billion ($299.7 billion) in assets at the end of June this year,
producing a 24 per cent rise in fee income.
With 62 per cent of revenue from Singapore, 15 per cent from Hong
Kong and 9 per cent from the rest of Greater China, DBS is “well
positioned” to capture wealth flows, the report said, although
DBS lacks “global connectivity.”
The report also cast its eye over Hong Kong Exchanges and
Clearing, AIA, Citic Securities, Sung Hung Kai, and Vanke.