Hong Kong Banks Tap Most Funds Since 2019 as Stock Demand Soars

Hong Kong's banking sector has witnessed a significant surge in demand for stocks, leading to the highest fund inflows since 2019. This trend can be attributed to several factors, including policy measures boosting the capital market, industry focus on sectors such as AI, IT, and retail, and the global IPO market recovery. Despite ongoing geopolitical tensions, investors continue to show interest in Hong Kong's stock market.



The market capitalization in Hong Kong's Stock market is projected to reach US$5.09tn in 2024, with an annual growth rate (CAGR 2024-2025) of -0.79%, leading to a projected total amount of US$5.05tn by 2025. The market volume within Hong Kong's Stock market is expected to amount to US$5.41tn in 2024, and the number of trades in Hong Kong is expected to reach US$33.17bn by 2025. However, the market capitalization and the number of trades have not shown significant growth, indicating that investors are cautious about allocating funds to the Hong Kong stock market due to geopolitical tensions and economic uncertainties.



Hong Kong banks have employed various strategies to manage risks and attract investors amidst volatile market conditions. One key strategy is the implementation of a Core/Satellite Investment Framework, which involves dividing the portfolio into two parts: "Core" and "Satellite" holdings. The "Core" holdings provide stability and steady income, while the "Satellite" holdings are more thematic and higher risk, aiming to maximize portfolio returns. This approach allows banks to balance risk and return, catering to different investor risk appetites and expectations.

Another strategy is the adoption of digital wealth management platforms, also known as robo-advisors. These platforms use algorithms and technology to provide personalized investment advice and portfolio management, making them accessible and convenient for a wide range of investors. StashAway, a notable digital wealth management platform in Hong Kong, offers a variety of investment solutions, including its USD Cash Yield product, which provides a stable and high-yield investment option with a return of 4.3% p.a. (as of April 2024).

High-yield savings accounts are another strategy employed by Hong Kong banks to attract investors. These accounts offer higher interest rates compared to regular savings accounts, providing investors with a safe and accessible way to earn interest on their deposits while maintaining flexibility. Some notable high-yield savings accounts in Hong Kong include the Standard Chartered Marathon Savings Account, HSBC One Base interest rate, and Citi Plus® Savings Account, offering competitive interest rates and rewards.

In addition, Hong Kong banks have focused on implementing existing regulations and new resilient requirements to strengthen their risk management capabilities. This includes adopting AI for financial crime and exploring the adoption of distributed ledge technology (DLT). To optimize costs and improve efficiency, banks have also adopted strategies for cost optimization, including targeted corrective interventions for inefficiency. Automation has been an effective tool in this process, addressing latent inefficiency in core processes across front, middle, and back offices, leading to increased productivity, reduced cost to serve, and an enhanced customer experience.

The pace of digital transformation in the sector is expected to accelerate in 2025, with over a third of financial institutions in Hong Kong already integrating generative AI in their operations. Virtual assets have also ranked high in the digital transformation agenda of banks and regulators, with the Hong Kong Monetary Authority (HKMA)'s Project Ensemble Sandbox and the HKEX's Virtual Asset Index Series supporting the development of the tokenization market.

In conclusion, Hong Kong banks have successfully tapped into the highest funds since 2019 as stock demand soars, driven by policy measures, industry focus, and global IPO market recovery. Despite geopolitical tensions and economic uncertainties, investors continue to show interest in Hong Kong's stock market. Banks have employed various strategies, such as the Core/Satellite Investment Framework, digital wealth management platforms, high-yield savings accounts, and digital transformation, to manage risks and attract investors amidst volatile market conditions.