Mainland families are increasingly using Hong Kong as a gateway for global investments, with HSBC Global Research reporting they hold a massive RMB 160 trillion (approx. US$22 trillion) in cash deposits. The bank estimates that about RMB 50 trillion (approx. US$6.85 trillion) of this "excess savings" could shift toward equities – a trend already reflected in record-breaking southbound flows via Stock Connect into Hong Kong since early 2024.
The RMB 160 trillion cash reserve, primarily held in fixed bank deposits, equals the combined value of all residential properties in the UK and France. While some funds are earmarked for retirement, RMB 50 trillion represents surplus savings beyond retirement needs. This capital could increasingly enter stock markets, given equities currently account for just 10% of mainland household financial assets, down from 15% in 2021 and 20% in 2010. The potential shift amounts to half the current market cap of China's A-share market.
Hong Kong as an Investment Portal
Southbound inflows through Stock Connect have already hit US$80 billion year-to-date. At this pace, full-year 2024 flows could reach US$180 billion, equivalent to half of last year's foreign inflows into U.S. stocks. These funds predominantly target high-growth internet/EV firms and high-dividend stocks in Hong Kong.
HSBC notes Hong Kong is becoming a critical global/regional investment portal for mainland families. Their appetite for Hong Kong equities is helping lower the discount rate for Hong Kong stocks amid mainland China's low interest rates, thereby bolstering the local market.
Pension Reforms to Accelerate Shift
Following Q4 2023 announcements about raising retirement ages and launching private pension schemes nationwide, HSBC expects further reforms to address pension coverage gaps. This will drive strategic reallocation into non-cash assets, particularly under-allocated private pensions, insurance products, and equities.
Related News:
US stock funds 'out of favor': MPF sees net outflow of nearly HK$6 bn
GBA can help HK integrate into national development landscape, CE says
Comment