Amy Lo has just returned from a business trip to the Chinese commercial hub of Shenzhen and is full of optimism. The Hong Kong-based private banker has enjoyed her first outing to mainland China in three years, after tough Covid-19 restrictions left the territory isolated and sent its economy into recession.
“Now that the [border] is open . . . I have a lot of requests for meetings,” says Lo, who co-runs Asia Pacific wealth management at UBS, one of the most profitable arms at the Swiss bank.
Lo — who is also head of UBS Hong Kong and has more than 30 years of experience in the private banking sector — says that, apart from allowing work trips to restart, the lifting of restrictions permits wealthy clients from mainland China, south-east Asia, US, and Europe to return to the territory.
Hong Kong, which was forced to follow a version of Beijing’s zero-Covid policies involving one of the world’s longest border closures, suffered a 3.5 per cent economic contraction last year as the territory battled its most serious Covid outbreak.
It resumed quarantine-free travel with the rest of the world only late last year and did not reopen its borders with mainland China until February, after Beijing’s abrupt U-turn on Covid curbs.
But, as well as giving Hong Kong a boost, the return to normal business life has revived competition with the city’s biggest regional rival — Singapore — to be Asia’s financial hub.
The south-east Asian nation stole a march on Hong Kong by reopening its doors to the world months earlier and reported 3.6 per cent growth in its gross domestic product in 2022.
Other numbers tell a similar story. Singapore’s airport arrivals are back up 70 per cent of their pre-pandemic levels, while Hong Kong’s are little over half the 2019 figure. Many Chinese billionaires migrated to Singapore during the pandemic and some foreign banks moved to relocate staff from Hong Kong to the city-state.
Yet, when it comes to wealth management, Lo says Hong Kong still has a significant competitive edge through its geographical closeness to mainland China — as well as a bigger capital market than many of its regional peers. Hurun, a research group that tracks the wealth of China’s richest individuals, identified nearly 138,000 families with a net worth of more than 100mn yuan ($14.5mn) as of 2022, in a report earlier this month.
Hong Kong is also ahead in stock exchange terms: the city’s bourse has a market capitalisation of more than $4.5tn, and hosted 89 initial public offerings last year, compared with Singapore’s total market value of about $650bn with just 15 new listings in 2022.
In terms of the wealth pool, Singapore is well behind. Hong Kong had 67 billionaires — individuals with a net worth of at least $1bn — with cumulative wealth of $383bn last year, according to a UBS global billionaires report released in December. That compares with Singapore’s 26 billionaires, with $107bn. Both saw a dip in the number of billionaires, and in total billionaire wealth, year on year.
The “past few years were tough” for the wealth management sector in Hong Kong due to Covid and the border closure, acknowledges Lo, who is married to Hong Kong’s health secretary Lo Chung-mau — author of the city’s Covid policies. But, with all travel restrictions and a 945-day mask mandate now scrapped, she maintains “Hong Kong is back”.
Lo, who began her banking career in Hong Kong at a private bank in the 1980s, before working in wealth management at UBS from the mid-1990s, has held various senior positions in the Asia Pacific region — such as head of global family office and head of ultra-high net worth.
“A question I asked every one of the clients when they came back here was: Did you see anything different?” she says. “They said: ‘Oh, [Hong Kong] is very busy!’ They are also surprised . . . They said: ‘Wow, it is very normal, back to normal now’.”
John Lee, who was appointed Hong Kong’s chief executive by Beijing in July last year, has recently been pushing for new incentives to resuscitate the city’s economy. Fresh measures for family offices with assets under management of more than $31mn — including a profits tax exemption — plus a new investment migration scheme to lure rich individuals are on the table. And a promotional campaign called “Hello Hong Kong” gave cash vouchers to visitors and 500,000 free air tickets to travellers, in an attempt to entice tourists back.
Some of those incentives have proven effective. The city welcomed more than a million visitors in February, for the first time in a single month since 2020 — although that is only a quarter of pre-pandemic levels. Last week, Hong Kong also attracted dozens of top family offices from mainland China, the Middle East, the US and Europe in an “invite only” summit — all part of a government push to have them set up their regional headquarters in the territory.
It is a push that is needed to help the city catch up. Singapore had an estimated 1,500 family offices by the end of 2022 with a relatively loose tax incentive threshold of at least $7.5mn in fund size. Hong Kong’s goal is to attract “no less than 200 family offices” to expand or set up in the city by 2025.
Lo insists both Hong Kong and Singapore are “important hubs in Asia”, and that growth does not have to come “at the expense of one another”. She adds: “Hong Kong still has the appeal, especially for some of the Chinese families, for the proximity reason.”
As both places reopen to the world, Lo says “it becomes a level playing field”: Hong Kong being the gateway into mainland China, while Singapore opens the door to south-east Asia investment opportunities.
Roughly 40 per cent of the assets under management in Hong Kong’s private wealth management industry now come from mainland China — up from about 35 per cent in 2019 — according to a report by KPMG and the Private Wealth Management Association in Hong Kong, last year. It surveyed 36 financial institutions and more than 200 wealthy clients in the city.
That suggests a future competitive edge over Singapore, as the mainland Chinese market has been “the biggest growth opportunity for the industry”, Lo says.
However, some high-net-worth individuals are becoming concerned about the geopolitical tensions in the region, Lo acknowledges. Hong Kong, following Beijing’s imposition of a national security law prompted by the 2019 protests, has cracked down on dissidents. Financial services industry executives are alarmed that opposition leaders have been jailed or have fled the city, and business figures — such as media tycoon and vocal Chinese Communist party critic Jimmy Lai — have been arrested.
“With the national security law and all that, it’s causing a lot of anxiety. But I don’t think any of them are giving up on Hong Kong,” noted entrepreneur Yenn Wong, speaking to the FT a few months ago. She added that, among the rich people that she knew, “everyone might be setting up second bases, or everyone may be having back-up plans”.
Unease around the Taiwan Strait amid ongoing US-China political tensions have also created uncertainties over the stability of the city’s financial system.
Singapore, in contrast, presents a more stable environment, as the city-state maintains a low-profile stance on the geopolitical situation. Lo acknowledges that challenges, including the US-China tensions, and admits that “in the short term, the geopolitical volatility will not go away”. But she adds: “If you look at it, this is not just a regional issue. You have also the Ukraine situation, right?”
“Looking back on Hong Kong history, Hong Kong has been very resilient,” she argues. “We had the 1997 [handover of the city from Britain to China], the Sars [epidemic], and also, in the past, similar kinds of [geopolitical] tensions.”
On top of this has come the global banking turmoil stemming from the collapse of Silicon Valley Bank and UBS’s emergency takeover of Credit Suisse.
Faced with these challenges, Lo has one key piece of advice for wealthy clients: always diversify geographically and by asset class. Alternative investments, such as hedge funds and commodities, have been of growing interest among family offices, she says.
Lo also says that interest in virtual assets among younger clients “will not go away” despite the collapse of crypto exchange FTX. Overall, though, asset allocation to cryptocurrencies is limited.
Meanwhile, more clients, in particular younger people in wealthy families, have been increasingly interested in allocating more of their funds to ESG investments and contributing to philanthropy, post-Covid.
Competition for talent is another challenge, says Lo. According to government data, Singapore’s workforce grew by about 230,000 people in 2022, while Hong Kong has lost some 140,000 workers in the past two years — a talent exodus prompted by the pandemic and Beijing’s tightening political control of the city.
At UBS’s Hong Kong branch, a “small number of colleagues” did relocate to places including Singapore during the pandemic, says Lo. But the branch saw a small net expansion in its team last year, including in wealth management. Lo says the bank has been “selectively hiring.”
Recruiting experienced staff in sustainable finance in the region is hard work, according to Lo. “We don’t have enough ESG talent,” she says.
Lo would like to attract people from the large pool of talent in Europe, where ESG has a much longer history, but acknowledges that this could prove difficult.
Still, she believes that the growth of business in Asia, including in wealth management, will create opportunities to entice colleagues and new recruits from Europe and elsewhere in the long run. She says: “When the soil is fertile, people will come here to farm.”
This article is part of FT Wealth, a section providing in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative and impact investment
