Taiwan eyeing Hong Kong’s wealth business

Taiwan's regulators and investment industry have ambitions to make the island a wealth hub that can compete with Hong Kong and Singapore, but it will very likely be a long road ahead.

The aspirations have been given fresh impetus in the wake of Hong Kong's mass protests – which have now dragged on for some three months and are widely seen hurting Hong Kong's status as a wealth hub, prompting some individuals to move their assets to Taiwan.

With no tidy solution to Hong Kong's protracted political impasse in sight, regulators and wealth managers in Taiwan appear keen to seize on the potential new opportunities.

To that end, the Financial Supervisory Commission (FSC) intends to release a new wealth management proposal that aims to put Taiwan on a par with Singapore and Hong Kong, Wellington Koo, chairman of the FSC, was quoted as saying by United Daily News on September 3. 

Just how soon it comes remains unclear, although news reports suggest it could be as soon as this year.

In an emailed reply, a spokeswoman for the regulatory body reiterated that the FSC is studying the regulations in Hong Kong and Singapore as it deliberates new proposals to open up Taiwan’s financial products to a broader range of investors.

This is to prepare for the return, initially, of any assets held offshore by wealthy Taiwanese, the spokeswoman told AsianInvestor.

She declined to confirm whether FSC would roll out the new proposals by the end of the year.

In a China Times report on September 4, government official Kung Ming-Hsin said Taiwan had to explore if it could fill some of the gap if Hong Kong’s role and function as a financial centre declined in any way.

Investment industry figures on the island appear to be champing at the bit too.

“This is now a once-in-a-life-time opportunity to develop Taiwan’s wealth management,” Lee Chang-Ken, president of Cathay Financial Holdings, was also reported to have said in a quote confirmed by a company spokesman. “It’s the golden era with the right time, place and people.”

Taiwan should develop itself into a funds port in which capital can come into as well as get out easily. This will not only lure Taiwanese to shift their offshore assets back to the island but also attract other billionaires who are worried about the Hong Kong protests to move their money to Taiwan, Lee said.

CHALLENGES

However, Taiwan has a long way to go if it is to catch up with Hong Kong and Singapore in the wealth management rankings.

With an estimated international market of $790 billion as of end-2017, Hong Kong ranked fourth after Switzerland, the UK and US in the international wealth management standings, according to a report published last year by Deloitte. Singapore was sixth with an estimated $470 billion.

Taiwan didn't feature on the Deloitte list, which placed the United Arab Emirates in ninth and last place on $10 billion.

Taiwan’s capital markets are also smaller than Hong Kong’s and there has historically been less financial innovation.

There isn't a sufficient supply of good investment products in Taiwan, which is pushing potential clients elsewhere, Lee said.

Taiwan needs to add more products and people to its wealth management platform. Only when it becomes a better wealth management platform will it become a wealth management centre for global clients as well as local ones, he said.

Hong Kong and Singapore are also considered to be much more international jurisdictions, Eva Law, chairwoman of Association of Family Offices in Asia, told AsianInvestor.

Taiwan needs more global financial service providers to open up shops on the island, as these international market players will help to bring more overseas customers, she said.

There are also political considerations that may prompt Taipei to tread carefully. After all, it's not just Hong Kong with a Beijing problem.

If Taiwan wants to target mainland Chinese’ offshore assets, there will be political risks, as Beijing may tighten its grip in this regard if Taiwan is perceived to be doing something against Beijing’s political wish, Law added.