With China's economic growth continuing to slow due to the real estate crisis, falling investment, and weak domestic demand, a survey found that China's high-net-worth individuals are concentrating their investments in overseas asset. In particular, investment fever is highest for Hong Kong, where the stock market has surged on the strength of Chinese tech stocks.
According to the South China Morning Post (SCMP) in Hong Kong, insurer YF Life and the Hurun Research Institute, known as the "Chinese Forbes," jointly published a report with these findings. The survey covered a panel of 500 high-net-worth individuals aged 30 and older from mainland China, whose average household net worth is 37 million yuan (about 7.7 billion won).
The report said that as China's slowdown persists, wealthy individuals are preserving asset by using gold and insurance products, while expanding global diversification to reduce risk. According to the survey, respondents' asset allocation was led by low-risk bank products and insurance at 44%, followed by stocks at 14%. The most favored asset over the next 12 months were insurance (47%), gold (42%), and stocks (34%).
Meanwhile, preference for overseas asset rose markedly. Eighty-six percent of respondents said, "We currently hold overseas asset or plan to hold them within the next year," and 56% said, "We plan to further increase the share of overseas asset within the next year." That is high compared with 45% who held overseas asset at least once in the past three years. The preference for overseas investment was even more pronounced among younger people. Among respondents ages 30 to 44, 61% said they intend to expand overseas asset, in contrast with 51% among those 45 and older.
The report cited as reasons for their focus on overseas investment: ▲ yuan exchange-rate fluctuations ▲ a slowdown in China's economic growth ▲ uncertainty in capital market reforms ▲ non-financial purposes such as study abroad and immigration.
Hong Kong (52%) ranked as the most preferred investment destination among China's wealthy. It was followed by Singapore (40%) and the United States (35%). This year, Hong Kong's stock market has outperformed major global markets, with the Hang Seng Index up about 32% on the strength of Chinese tech stocks. As Hong Kong's stock market draws investors' attention, its financial market is benefiting. According to a Morgan Stanley report, as of September this year, 18% of the total stock holdings of mainland China public funds were invested offshore (mainly in Hong Kong), a sharp increase from 5% in 2019.
While China's wealthy are actively investing in overseas asset, they plan to reduce investments in time deposits and money market funds (response rate 25%), real estate and land (19%), and bonds (12%), the survey was found. They also said they plan to cut nonessential consumption expenditure over the next year, citing luxury goods (29%), social activities (18%), and entertainment and leisure (17%) as the first categories to trim.