This brief commentary brings together examples from across Asia to find a common theme of cross-border liberalization of funds, capital and investments. In some ways, this flies in the face of a narrative that globalization is being reversed.
Asian countries are removing barriers to cross-border capital flows, paving the way for significant growth in the wealth and investment sector in the years to come, according to Cerulli Associates, the research and analysis group.
One of the most anticipated connectivity programs is the Guangdong-Hong Kong-Macao Greater Bay Area Wealth Management Connect (WMC), which will provide residents with access to wealth management products distributed by banks in the region, once deployed. In addition, Shenzhen and Hong Kong launched a master-feeder exchange-traded fund link in 2020, with the first batch of four ETFs listed last October.
Two new funds were added to the China-Japan ETF link in 2021, with the program starting in mid-2019. Another ETF cross-listing link will soon be set up between China and Korea, following a deal in May 2021, the report said.
Other supportive measures include India increasing each fund company’s investment limit in foreign ETFs from $ 50 million to $ 200 million, and doubling the investment limit by offshore titles of each fund manager to $ 600 million last November. In Southeast Asia, the Philippines joined the ASEAN Collective Investment Scheme passport framework in May 2021, and a mutual recognition of funds scheme between Hong Kong and Thailand came into effect the following month. . Korea introduced the Asia Region Funds Passport program in May 2020, although the program has yet to approve its first fund.
To a certain extent, the reforms reflect the cross-border liberalizations (with some reservations) observed in areas such as the European Union with its UCITS fund structures which can be ‘passported’ across national borders. (Whether or not the UK’s departure from the EU interrupts this process remains a hotly debated topic.) Decades.
Cerulli said the growing appetite for foreign investment has been “seen in many Asian markets” except Hong Kong and Taiwan, where consumer interest in these funds has always been strong.
In India, international themes gained momentum among sophisticated and high net worth investors last year, prompting the launch of various global fund of funds, whose assets grew 3.5 times in 2020. In Korea, assets of cross-border funds would have tripled. between 2017 and 2020, in a context of sluggish growth in the internal market. In Southeast Asia, funds from Greater China have gained momentum due to the positive outlook for the country’s economic recovery, the company said.
“The growing number of cross-border connectivity programs, combined with other regulatory measures, is expected to expand the variety of offshore products available in local markets. But while such initiatives hold promise, they will take time to mature and therefore Cerulli expects their growth to be gradual and steady, ”said Ken Yap, Managing Director Asia at Cerulli Associates.