“I feel that in these years and in the next ten and twenty years, wealth management must be the engine of financial services, and it will definitely drive the growth of the entire financial services and financial companies.” On October 23, Zhao Ju, Chief Investment Officer of China Merchants Bank Said this at the “2021 Global Wealth Management Forum” hosted by Caijing Magazine and Caijing Think Tank. This forum focused on “creating an open and innovative wealth management new highland”.
(Zhao Ju, Chief Investment Officer of China Merchants Bank)
Zhao Ju believes that China’s wealth has grown from US$20 trillion 10 years ago to US$80 trillion now. Our growth rate is faster than the global growth rate. The wealth generated by the business sector of the new economy exceeds the wealth created by the traditional business economy sector. In the past three years, the world’s annual wealth created by the new economy sector was approximately US$700-800 billion, and the wealth created by the traditional business sector may be US$200 billion.
He said that the current five major trends are family trusts and the rise of family offices; digitalization provides a guarantee for hierarchical operations; one-stop services overseas; professional investment capabilities will drive the core competitiveness of wealth management; and emphasis on sales value Turn to emphasizing customer value.
The following is the original speech:
I still want to talk about some new characteristics and new trends of the entire wealth management.
The first feature is that in the past ten years, domestic wealth has grown faster than the global growth rate.Global wealth has doubled from US$200 trillion a decade ago to US$400 trillion today. Our wealth in China has grown from US$20 trillion 10 years ago to US$80 trillion now. Our growth rate is faster than the global growth rate.
Such a feature has also made the competition between Chinese and foreign wealth management institutions in the Hong Kong market very fierce, and foreign-funded institutions have also continued to grow in the Hong Kong market. One of our Chinese-funded institutions is a force that is constantly developing in Hong Kong represented by banks and securities companies; another is developing their wealth management business starting from the point of securities trading.
In terms of allocation, these Chinese-funded customers allocate 50% of their assets in the Asia-Pacific region, and 80% of the 50% allocate assets related to China or Hong Kong.
The second feature is that the wealth generated by the business sector of the new economy exceeds the wealth created by the traditional business economy sector.In the past three years, the world’s annual wealth created by the new economy sector was approximately US$700-800 billion, and the wealth created by the traditional business sector may be US$200 billion. In fact, this is also the case in China, because the wealth effect created by the Sci-tech Innovation Board may be much stronger than that of the main board, whether it is Shanghai or Shenzhen.
The third feature is the emergence of digital service networks. In the past, people had to meet to open an account, which was very inefficient. Since about two years ago, the Hong Kong Securities Regulatory Commission and the Hong Kong Stock Exchange can agree to remotely operate facial recognition and AI technology recognition. Now it is possible to form a remote account opening network, including our own Yilong Global, and to open an account remotely. You can do transactions on it. We can see products on it, including stock property rights, fund products, bond products, and most of them are available in Operate above.
In the previous paragraph, I saw an article in the country saying that companies like Tiger should be supervised. I think it’s a bit biased. For example, Futu is a company with a license in Hong Kong, and they also have a license in the United States. What they are dealing with are Chinese overseas assets, which may have been pushed a little bit in the past, but now they basically rely on APP to open accounts, including our Yilong Global also uses APP to open accounts, and can also do transactions on it. Especially since the epidemic last year, its transaction volume has increased significantly, which also shows that the degree of difference between Chinese overseas assets and overseas transactions has increased and deepened. This is also a new change and a new phenomenon.
The fourth feature is that overseas risks are also increasing.Yilong Global can also provide APP arrangements. Last year, there were 142 new issuances in Hong Kong. The first-day issuance price was about 40. This year, there were 72 issuances in Hong Kong. Keep increasing.
In addition, in the Hong Kong market, there were about a dozen defaults last year, and the default amount was about 11 billion U.S. dollars. There are more than a dozen this year, and the amount of default has exceeded 20 billion U.S. dollars. Today is (October) 23. Today, Evergrande has a bond that should pay interest on September 23. The grace period of one month is October 23. If it is not paid today, it may cause him to default on his US$32 billion debt. This is a relatively big thing, and the debt burden it faces may also be a relatively big challenge for Evergrande.
The last feature is that all alternative investments, including PE, have been extended.Profits have also decreased. It is not a lot to be able to achieve a KPI of 1% within a standard time such as 5+2 and 5+3, which highlights some risks in the market.
Of course, we also see some trends, especially in overseas markets.
The first trend is family trusts and the rise of family offices.Of course, domestically, including our central banking industry to provide family office services, the threshold is 50 million yuan, which is more flexible in the Hong Kong market. Last year, the entire trust scale exceeded US$600 billion. This is actually the steps and methods for customers to divide risks.
The second trend is that digitalization provides a guarantee for hierarchical management.Because in the past, what we call wealth management is to provide services to ultra-high-end individuals or those who have crossed the threshold of wealth management. Of course, it continues to be available now, including Chinese-funded and foreign-funded services. Another layered operation is ordinary customers, such as Tiger, Futu, etc. It is possible to provide services to ordinary customers, and the development speed is very fast, and the growth is also very significant.
The third trend is one-stop service overseas.What we call one-stop service refers to individual customers in the past, from individual product services to tax planning, including insurance, risk aversion, etc.; in addition, one-stop services at home and abroad, including China Merchants Bank, our domestic The largest private banking institution, we also provide customers with RMB-related management arrangements in China through CMB International, and provide wealth management arrangements for overseas assets in the Hong Kong market.
The fourth trend is that professional investment capabilities will drive the core competitiveness of wealth management.At present, the requirements for professional management ability are getting stronger, which means that you can outperform the big market. What you do is to be able to reverse the market. Other markets are relatively calm, and the assets you are looking for can do better. This is more obvious in the market. For example, some funds that we sell on behalf of China Xia have a bond fund. The high-yield bonds I mentioned earlier are very risky. This fund quickly adjusted its strategy and invested a lot of high-yield debt in the Asia-Pacific region. We see that professional capabilities are in the entire operating environment. Got a very significant manifestation.
The fifth trend is to shift from emphasizing sales value to emphasizing customer value.In the past, we sold things. I sold you stocks. Stock trading included private equity products, bonds, and insurance for you. Now it may be more hopeful that through the flow of funds, for example, the bank has some funds flow at each point, your suppliers, your operations, your sales customers, etc., through the sales value of the management of private wealth customers, to gradually pass Capital flow and business flow are reflected in customer value. We hope to give full play to customer value.
I feel that in these years and in the next ten or twenty years, wealth management must be the engine of financial services and will definitely drive the growth of the entire financial services and financial companies.
In terms of overseas assets, the US dollar is still the mainstay. Although the US Securities Regulatory Commission is still very cautious about the listing of Chinese companies, we still see a lot of hopes to go to the United States from the perspective of valuation and liquidity. Including the fact that we see many customers in terms of asset allocation, he has no choice, because China is still a country with foreign exchange control, and it is not so simple to make adjustments inside and outside the country. For example, what we are currently doing in the Hong Kong market is mainly the overseas assets of Chinese residents, because there are renminbi overseas. However, the scale and capabilities of the RMB are not that large. Most of the assets are allocated in US dollars. What we see in the allocation process is related to and unrelated to China, such as in other parts of the Asia-Pacific region, including the United States and Europe. . There may be a difference because of the different prevention policies for the epidemic, which may lead to different effects on the economy.
Judging investment now, judging future development, one is carbon neutrality, which is a global common goal. Although this target is currently affected by energy prices or other factors, the impact of the big target remains unchanged.
In addition, in the long run, Sino-US relations also have an impact on asset allocation and investment. Regarding the investment layout of the semiconductor industry and the high-tech industry in China, our asset management agency may have to consider the impact of these aspects when providing advice and thinking to customers.
U.S. infrastructure may offset some of the real estate prices for bulk commodities. Xu Jiayin also proposed to reduce sales from 700 billion to 200 billion. Such giants have all made such demands. The development of real estate will have a lower traction on GDP and China’s economy in the past, and will definitely affect the layout of some assets and varieties of the world. Not only the United States put forward such an idea, but other European countries may also have similar ideas. The United States is indeed very backward in infrastructure. Biden’s ideas may also represent the ideas of many Americans. He also hopes to update, develop, and improve himself. This may affect many infrastructure, including many investment areas. As a wealth management agency, experienced managers will definitely provide good help and thinking in these aspects, so that your asset allocation can adapt to the development of the overall trend. It cannot be said to outperform it. At least your assets can be reasonable. Return.
【Author: An An】 (Edit: hongguan)
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