Hong Kong's financial sector is roaring back to life.

In the first half of the year, IPO surged, making the Cities Exchange number one globally for raising funds on the public market.

The Hangsing Index is up twenty seven percent this year, led by biotech stocks.

Hong Kong is also driving ahead to become a digital assets hub with the new stable coin ordinance.

There's also billions in untapped funds in China.

This has driven a surge and money into Hong Kong, with more family officers to manage that flow of capital and a new generation of wealth taking over risk remain.

Of course, the property segment is still depressed and geopolitical headwinds persist.

You're listening to ASI Eccentric from Bloomberg Intelligence.

I'm John Lee in Hong Kong and this week we're speaking with Vivian cou CEO of Hong Kong's Private Wealth Management Association and previously ex head of compliance at Goldman Sach.

She's also a crypto advocate and on the Government Web three task Force for regulatory matters.

Vivian, welcome to the show.

Thank you, thanks for having me.

I wanted to start off by asking you like about Hong Kong.

Are you surprised that the financial sector has rebounded so quickly this year because at the beginning of the year there was quite a lot of risks, uncertainty regarding geed, political and tariff risks, China's economy was still pretty slow.

I would actually categorize it by talking about the comeback started before this year, and then we are seeing a gradual progression in terms of how things are recovering.

We have an ANNU report which we prepare every year.

Last year was the first year that we see the AUM number increasing after a couple of years.

And then if you look at the statistic that came out from the SFC survey this year, which reflected in twenty twenty four, we see a very positive increase sort of double digit fifteen percent an increase year over years.

So I felt that the comeback has started last year.

Of course, you know, there are different factors that would affect how people are investing, how company is deploying funds, and how investors choose to invest.

But I see that that is a progression of different things that's happening that's bringing the comeback.

And just talking about some figures like I'm quoting the Boston Consulting Group.

They estimate that the cross border wealth of Hong Kong is at two point seven trillion dollars.

Now that's almost the same size.

Or it's about to overtake Switzerland as the largest offshore WORLTH hub.

But what's driving all this growth, Well, that's again that's probably not a new phenomenon that Hong Kong.

It's kind of a position to take over Switzerland.

You know, Switzerland being a historical wealth management hub, you know, have a lot that it's providing.

But Hong Kong, I think a few things that have really changed this year, even post COVID.

It's this role about super connector you see a more flow between Hong Kong, rcion the Middle East, including some that we participated in with the government, the delegations and even this year alone also Hong Kong, we worked with FSDC, they hosted some RCAN delegation.

So there's a lot of exchange in terms of how outside investment can come in and also you know locally, how our own investor can invest a broad So that's a lot of different discussion.

Regimes you know, immigration scheme and the like that are facilitating all this discussion and investments cross flows.

But how much of that money is coming from mainland China.

Well, our reflected that majority.

If we rank in all the different regions that we see opportunities on, mainland China is definitely on the top.

But then our report last year talked about, you know, the next one would be Arzian like Arsian countries coming in the new corridors being built, and the third one is Middle East.

So the majority of the wealth we see still coming from mainland, although there's been some challenges in terms of recovery and in terms of how the economy is like in China, if.

We think of Hong Kong, traditionally the super rich, the wealth you have been from the property segment, Like if you look at the billionaires of Hong Kong, they're all property tycoons.

But now you look.

At you all the money coming in from China.

You see the stock market, like biotech stocks doing really well, there's a lot of tech IPOs, which industries is all this new wealth coming from.

I think it has to do with the evolution of the different economy China, Hong Kong.

Hong Kong, yeah, historically known for property development and then China to a lot of it.

But if you see some of the newer generation next generation, a lot of them focuses on technology digital.

And then again our report last year showed like biotech as a top sector that investor invests in virtual asset actually like class second and commodities.

So I would characterize it with a change in investment appetite and or different generation they are interested in investing in different things.

And talking more close on the Hong Kong IPO market, we also see some reforms in terms of the Hong Kong Exchange, how they're change a listing regime to facilitate you know, biotech companies in some of the listing chapters to facilitate easier listing in Hong Kong.

So that certainly has helped.

Okay, talking about IPOs, like I recently spoke to the Hong Kong Exchange and they said there's over two hundred companies waiting to be listed in Hong Kong.

You know, with all this money being listed, is this being reinvested into the local economy.

I can probably just talk around in terms of what I see on what's coming into wealth management.

So as I mentioned earlier, it's clearly reflected the year over year, that's a pretty significant increase.

Whether that comes from IPO or not.

The wealth management market, a lot of the revenue, what we call transaction revenue, does come from IPO market, So I would say that, you know a portion of that is definitely coming in into wealth management.

But again some listed here they might be looking for dual listing.

You know, Hong Kong, it would be a reasonable place, would be very mature sort of finance infrastructure to be listening here.

You know, we're a free market.

And we also just got back in terms of the Investment Index Global index, I believe number three, like in the top three, and that's kind of moved up also in the recent few years.

And if you look at women touched on this a bit later or not on family offices, you know, some of the family office that decide to come to Hong Kong also is because of the package of our immigration about that concession and other factors that they like to move to Hong Kong and come to invest here.

Well let's talk about it now.

So with all this new money coming into Hong Kong, is this being managed by like said, private banks, Is it like family officers.

So the range of different investors that we see.

Our association deals well with a private bank, so we kind of interact with them more.

But we also work with family office Hong Kong for example.

They are the ones that who goes out pretty aggressively.

No mandate by the government with specific APIs on how many single family office for them to bring it in Hong Kong.

We have a live example.

We just admitted one of the pretty sitable US fund managing over eight hundred billion.

They're a family sort of fund and they have establishment in Singapore, not yet in Hong Kong.

They were actively looking at it and they just joined it as a member.

So it kind of shows their confidence or at least they think that they're definitely opportunity that they feel there is in Hong Kong.

Otherwise.

We also work very closely in giving feedback on things like tax concession.

You know, if you have family office coming, like if you look at the different brackets of the amount that will qualify for tax exemption family offices Hong Kong is lower than Singapore or Dubai, you know, we always get compared.

These are two very calm and comparable in terms of jurisdiction that people compare us with.

So in your position, you'd be able to see, like all the creation of new family officers, you're saying, there's still a lot to be created.

Family office it can of a lose to them in a lot of sense.

I think single family officers, you know, they're basically at the wealthy families.

You know, they have our own team that manages the well and they're what you call the external asset managers.

They are more usually like traditionally X banking professionals and that they have set up their own shop to manage money.

So they're kind of two different sets, the single family officers.

If you look at the latest Hong Kong report also the tracking numbers of how many I believe even this year alone there maybe fifty like so far, I think fifty that has he either KNW that's been set up or is expanding their presence in Hong Kong.

So those are all very positive.

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And Shair I wanted to talk about the opportunity from mainland China.

Now that's been a traditional source of the fundraising for family officers and wealth management.

Like how much more is there to go?

That's like a million dollar question.

I think some of the challenges hasn't really changed, probably in decades.

It's, you know, the ability to move funds offshore because a lot of these wealthy individuals, you know, they probably are very wealthy already in China, but you know, how are they able to do they already have funds offshore.

That's usually a big factor.

I mean, if they are wealthy early on they decided, you know, they want to expand internationally in different businesses, they probably already have funds offshore.

But the Connect scheme, for example, you know, the wealth connect scheme, which is a huge focus of our industry.

We have been loving for some time that the quota right now doesn't really surface purpose yet because there's only three million dollars in rem and Bee, and if China consider revising the limits or make the next enhancement, we are strongly advocating that it should be a much higher number because the sort of general account opening sides or even professional investor is at a one million US level.

So we would hope that's something that we can aspire to work with the regulators and the government on.

We did sort of touch on like the next generation of wealth.

There's been a lot of publicity on how much wealth is being I guess like transferred from like the founders to the second sometimes the third generation.

You know they are often Gen Z or millennials.

Tell us about this segment, how the needs different.

It's a great question because even within the association itself, never a clear definition of what the next gen is.

Next gen is usually, you know, the most common character you characterize them with more tax savvy.

That's why we in our report last year, the one to five million segment was one that we think would have more explosive growth, primarily because they can be served by banks.

But then a lot of banks now actually also have tach plat where you provide technology that I think those younger generations can invest themselves, so some of other setup like robot advisors or tech companies that they are more and more that serves with that segment.

So we felt that that segment will have more ways to invest and also some of them, particularly next gen for wealthy families, they look at impact investing or you know, is what they do meaningful because they are very wealthy.

But how they want to spend the funds.

Do they want to invest in things that would be more climate friendly because they truly believe that in the whatever twenty years, if more damage is done to the planet, then that affects the way that they live.

So they have a different mentality into how they want to spend money and invest.

And are they also more amenable to sort of new products.

I'd imagine the old generation would be much more amenable to like the sixty forty equity on portfolio.

But are they more willing to invest in things like in a digital asset.

That's certainly a big trend because this was probably a couple of years back.

But when they look at the age group that obviously is most savvy or most interesting in digital asset is usually like below thirty five.

But I see that changing with this cycle, you see much more institution participating in the virtual asset space.

That's why when you look closer to Hong Kong about Stable Point Ordinance, about the virtual asset framework the SFC put out as fire, you know, some of these framework is really to kind of make traditional finance and the financial technology sector converge.

So I see that now there will be more offerings that would be more simple, that you would allow a more layman to invest in.

I think this cycle that would probably change as a trend that in the past, primarily it will be younger generation investing in virtual assets.

But I see that depending on what country, because more undeveloped country usually you have a higher adoption.

So the unbanked population usually have a higher interest in virtual assets because you just need a computer, a phone, you don't really need a back account to transact a lot of them transaction tokens.

And then more unstable countries also seem to have higher adoption.

So Vivian obviously the CEO of Hong Kong's Private Wealth Management Association, But as we mentioned previously, you do have another HAD and you are on the Government Web three task Force.

Were you intimately involved in the stable coin audience that just passed in August.

I wouldn't say I was intimately involved.

We definitely gave feedback.

And then this goes before PWMA.

So before PWMA, I was running another association which helped crypto companies to do advocacy.

So when I met with the HMA, they said we were the first crypto association that went with them, and that was when they first started thinking about stable point.

I'm guessing that had to go back to prob the twenty twenty two twenty three because at that point the regulatory framework wasn't as developed.

For example, the SFC and the AMY are still looking at what they will respectively be responsible for stable coin.

You know, I think people understand that it will be used for payment rails, but then there's a big suitability aspect as in, you know, it's a suitable for retail professional So at that time it wasn't as developed, should I say, But fast forward, you know, I think the whole Hong Kong got very excited.

Also, I think that drew on what's happening in the US as well, with the Genius Act, which also focuses on like giving licensing for sable cooin.

Yeah, So the US Genius Act was passed in July, and I believe just a couple of weeks later, Hong Kong passed the stable coin audience I believe on the first of August.

So it's it was really quick.

I think the market was really surprised at how fast Hong Kong moved on this, Like what is this signal to the market that you know, Hong Kong wants to be a leader in this space, like tell us.

Well, the government is loud and clear on that point.

They want to build Hong Kong into a digital ass at hub.

And the appetite you put a framework on table coin has been in the pipe, as I mentioned, you know, since we first interacted, because there was an early consultation that came out on that and there was a sandbox that quite a number of companies had gone into in terms of stable coin, but it was, as you said, not until August where the sort of legal framework came out.

Right now, I think you probably saw HAMA and SFC put out also an alert telling people not to get so excited about stable coin, because of course there's a lot of potential.

You know, IMF had a report just said that twenty twenty four the two trillion of stable point volume.

So that's a big number that people are excited about.

But stable cooin is not like bitcoin, for example, or ethereum.

It's fairly it's not going to go up the way it does.

And then if you look at the requirements as well, it's fairly difficult to comply.

And I think that's done for purpose with investive protection in mind.

So I'm sure HMA doesn't just want to give the license to any company.

So one of the ones that are our member for Cena Charter, for example, they're the first one that now said they're going to issue a Hong Kong dollar back stable coin with a JV with Animalka, with Hong Kong Telecom.

So some of those larger brands, more reputable firms, I'm sure actually would be one of the first batch that that get our license.

Yeah, we just literally interviewed Animoka a couple of weeks ago on stable coins.

But I wanted to get your view.

Is there much of a difference between the rules and laws of say the Genius Act versus Hong Kong's stable Cooin Ordinance.

Oh huge, Yes, there are two different two very different frames, although you know they both touch on stable coins.

So number one, if you look at things like the capital and the liquiditive requirement, Hong Kong has very specific requirements that what needs to be backed by and it can be in different currency.

You know, REM and B would be one of them.

Can be on US dollars, you can be Hong Kong dollars Genius Act for the US one you can only denominated in US dollars and I won't sort of go through odo technicalities, but they are a different level of regulation for the Genius Acts.

So if you are sort of a bigger setup, then you get regulated at the federal level.

It was a smaller one that you get regulated by the state level.

It kind of draws on interesting questions on would the traditional banks be applying for those you know, who would be the first one?

You know, Circle ANETA would be the first two.

That's because in circulation right now in terms of volume, but they're well known, you know Circle when listed, so they're different regime and the Genius Act it also got rolled out quite quickly.

But the whole infrastructure that the US is developing is going to be a multi year long infrastructure so for people to even apply and look at all the jurisdictional consideration on the size, you know, on volume and whatnot, it will take some time.

Whereas I kind of see Hong Kong would have some major player that would get licensed in the shorter term.

So when do you think these licenses will be announced?

I think that's more of ahma question.

But they would be incentifized, you know, if those more putable firms can meet the requirements to kind of put them in action, because that would be a great branding opportunity for Hong Kong, you know, to be one of the first one who approved like a sable coin issuer out of Hong Kong and also on Hong Kong dollar nominated for example.

So I don't think it's going to be years.

I mean you talking about.

Months, and with these stable coins in Hong Kong, there have to be one hundred percent back by that feared currency, right, Well.

There's a range of different things.

I mean, it cand of get listed out in the requirement, so it can be US treasury, it can be things that are liquid and safe.

Because if you remember Luna.

I don't know if everybody remember Luna like I did, but the last big stable coin crash called Luna, which you know went down ninety percent, so people realize tablecoin actually isn't that stable.

After that, everybody drew reference that was l go back stable coin that all the different jurisdiction at least a larger one, and Hong Kong included.

They would only consider a list of very narrow range of what can be backed, and it has to be liquid, it has to be so it's only a very narrow range of what it can be used to back, viet being one of them.

And is that more stringent than the US genie sect.

I think it's different.

It's kind of comparable and different.

I think the idea would be there comparable because it still needs to be back by something that has liquidity and safe.

But the US has a broader poor things that you can use to back the stable cooin.

Okay, listening to the comments from the Trump administration and in particular Treasury Secretary Scott Besson, now one of the aims of the genie sect seems to be to maintain the hegemony of the US dollar, to make sure that you know US dollar is dominant in transactions in trade finance.

What's Hong Kong's angle.

Well, there are a few different angles you can look at.

I think in just looking at as a payment mail, you know it has fastest settlement, cheaper all that is actually kind of a positive thing.

But people also look at you know, if I want to achieve that, do I have to use stable coin?

Can I use other tokens to achieve that?

That's why I think a lot of people looking at should we tokenize the money market once or do we use savil point to back it?

So of course saverle point, if you use it under properly regulated is sure then it's safer because as you said, it's one for one back.

The volatility is supposed to be much lower than if you used to token, but it largely depends on how the circulation is.

You know, where you can use it.

It's a bit like you know, if I create own token, it can only be used in my own company.

What's the point of it?

So the Hong kongole Bank, stable Point, or even with other denominator, the idea is you can break through a lot of this cross border payment rail or other things that you could you know, typically would need days or weeks to get a transfer or get charge a lot to do.

Look this is and this is a true story.

Last year, it once took me like five working days to send money from Hong Kong to Australia.

I'm not going to tell you which bank that was, but but Vivian used to be a banker for many years, so you do have experience in this space.

Do you think these utile assets, stable coins they intermediate the banking industry.

Well, it's already happening.

But one thing I point out which I find interesting is the whole notion of the centralized finance crypto was that it was going to disrupt, disintermediate.

But in a lot of ways.

If you look at things that are happening now, things are converging.

I feel that they complement each other rather than try to push the other out of business.

But of course, you know, disrupting meaning that the traditional needs to change otherwise they lose a fair bit of business.

Just as I was mentioning earlier, you know some of these robodvisory or tach platform is disrupting maybe the lower end of the private banking market.

And crypto and again distable coins, some of these payment rails probably are disrupting credit cards Let's say I pay users stable coin now, and then do I still need credit cards to be getting credit if it is faster cheaper, so master and least that's why they start at having save a coin on circulation.

Now you can you can actually use some specific credit cards which are crypto friendly to be paying for things.

What about other types of tokenized assets, like do you see that you know really growing?

That depends on what it is, because the most commonly thing that's being tokenized now are things that money market funds.

I also had a question myself.

Money market fund is very liquid already, you know, why do you need to tokenize it?

But when I look at the costs, it's safe.

And also it can be used as collateral, like if you can immediately settle, like you know, you can actually cut out some of these processes.

The amount it is safe is pretty phenomenal, and that is something that's easily understood.

But not all tokenized quote unquote assets or instrument it's going to be better than non tokenized one Robin he for example, they look in tokenized security sell a lot, but trading is securities in a tokenized form is very different, you know from trading a stock you don't have voting power, you might not have a lot of avenue that is listing that specific token, and they're just different considerations.

So people should just understand the difference.

Just putting a token azeed wrapper around it doesn't mean that, you know, it is a word three and it's definitely better than the non tognized version.

We've talked about a lot of things we've talked about, like the IPOs coming back to Hong Kong, all the wealth management products driving the growth of family offices, and also, you know, Hong Kong's in the digital landscape.

Where do you see Hong Kong going in the next sort of say five years, Like how is the city going to change?

Well, I'm born and bred from Hong Kong.

I have an extremely positive view of Hong Kong.

I just think Hong Kong has a lot going for it.

But Hong Kong probably needs your reset.

You know, we are a very strong financial center, we still are, but I think it's just kind of looking at where the opportunitylize on how to capitalize it.

Why the government decided to build Hong Kong as a word three or digital asset HALP is because some of the opportunities that they see that Hong Kong can really capitalize being very cootutions and to China.

There's a lot of tech talent out there, you know, Cyberport Science Park.

I think all this tech development can really help develop more solutions that are Hong Kong based.

They have a big incubation site and on the virtual asset side because we move so fast in the last couple of years in coming up with frameworks, and China investor also has interest if they have money afterhore to be investing in Hong Kong.

So we're in a very strategically well positioned region to be capitalizing all that.

But you know, having that said, there's also a lot of competition, you know, Dubai and sort of Saudi and some of these other regions have been named again and again about oh, are we kind of losing business losing clients.

I don't actually see those as mutually exclusive.

As I said, it probably is complementary.

A client can probably have booking centers in multiple jurisdiction, So they're just going to look at like where the money flows, where you have best infrastructure, where you have favorable government policy.

And I feel Hong Kong as developing fast in terms of making changes, particularly post COVID, to be capitalizing on all of that.

Great, well, that's a fantastic way to end the show.

Vivian, thank you for sharing your insights.

Thank you.

You've been listening to Age Eccentric from Bloomberg Intelligence.

I'm John Lee in Hong Kong.

You can listen to all our episodes on Spotify, Apple Podcasts, or wherever you listen.

And this podcast was produced and edited by Clara Chen.

Thanks for listening.