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Data drives optimism for Hong Kong MD

29 July 2020

The whole world is in a period of significant upheaval and turmoil and perhaps nowhere in the world has that become more obvious than Hong Kong.

Having already weathered the protests of 2019 Hong Kong was one of the first places to face COVID-19 from the end of January 2020. It is currently in the midst of its third wave of that disease with no end in sight. Additionally on 30 June 2020 a new National Security Law (NSL) was promulgated by the People's Republic of China (PRC) and swiftly implemented by the Hong Kong Special Administration Region government. Following the introduction of that law the international financial community has been mourning the end of Hong Kong as we know it.

Despite all this I personally remain bullish on Hong Kong and PraxisIFM remains committed to this jurisdiction and the wider Asian region. Why is this? In a word: economics. The economic fundamentals for Hong Kong remain strong.

Over the past few weeks on my LinkedIn page I have shared statistics that support that view and also linked to articles on the same theme. Here's a more in-depth analysis of those statistics and the information contained in those articles.

  1. The Hong Kong economy remains resilient: I accept that Hong Kong had a terrible first quarter this year. Real GDP contracted by 8.9% the sharpest contraction ever recorded. However while second quarter statistics as a whole aren't yet available the picture for the second quarter does seem rosier:
    • The value of merchandise exports fell by 4.3% vs 9.7% in the first quarter.
    • Consumer Price Inflation (CPI) was 1.2% in June. By comparison CPI in Singapore was -0.5% indicating a deflationary state.
    • Unemployment is 6.2% and underemployment is 3.7% suggesting that employment prospects remain robust.
    • The HK government entered COVID-19 in an extremely strong financial position. By April this year it had reserves worth 22 months of expenditure and no net debt. How many other developed economies can say the same as they plan tax increases to pay for unprecedented economic stimulus?


2. The financial services sector has significantly increased as a share of HK's economy and is likely to continue to do so. The sector increased from 13% in 2004 to 20% in 2018. Data that supports my conclusion that the financial services sector will continue to grow from its 2018 level include:

    • In 2019 HK (again) had the highest number of stock market listings. By the beginning of July this year it had already had 64 new listings making it the world leader. By comparison London had notched up only 20 by the same time.
    • The PRC is already an economic powerhouse being the second largest economy (by GDP) in the world. As the world fights its way out of the COVID-19 downturn the PRC is expected to contribute 30% of the growth in global GDP. Two-thirds of investment inflows into the PRC are made through HK.
    • HK bank deposits stood at near record levels in May and as at 16 July 2020 the HK dollar continued to trade at the top of its permitted US-dollar band.
    • The Hang Seng (HK's stock exchange) is up 13% for the year and was up nearly 6% in the first four days of trading since the passage of the NSL (although it has dropped back quite a bit since then).
    • The HK government continues to invest in HK as a financial centre including for private wealth. For example the Financial Services Development Council has put forward recommendations for legislative enhancements to improve HK's environment as a centre for family offices.

Need more proof? Even Singapore HK's arch nemesis in the financial services sector for Asia recognises the strength of HK. Ravi Menon Managing Director of the Monetary Authority of Singapore Singapore's central bank has said that HK remains a 'formidable' financial centre and 'actual fund flows [from HK to Singapore] are not very large. Flows of activities and businesses are also not significant.'

As well as being gratifying to HK egos the fact that the data does not support the perceived wisdom of the wholesale move of HK financial services to Singapore is encouragingly indicative of strength for HK to come. It seems those spreading rumours of such flight may not believe their own hype.

What do I think this means for HK as a private wealth and corporate services centre? Well:

  • We're still seeing strong demand for HK trustees in pre-IPO founder trust structures
  • Likewise that demand is strong for HK trustees in employee share option plans arising from pre-IPO planning by companies listing in HK
  • As well as robust numbers of equity listings we expect to see continued robustness in debt listings. Both will drive demand for security trustees.
  • Even where clients wish to use overseas laws or trustees HK remains a valued and trusted centre for administration because of time-zone and language synergies.

To discuss (or debate!) my views further please contact or via LinkedIn. Further information on our Wealth Structuring Services for Private and Corporate Clients is here.


Sources include the South China Morning Post Hong Kong Economy and the Department of Statistics Singapore.

This article constitutes neither professional advice nor a binding offer by us to provide professional services . Any engagement in respect of our professional services is subject to our standard terms and conditions of business and the provision of all necessary due diligence.

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