Introduction
Hong Kong economy is characterized by diversified investment opportunities. It is considered as a chief fund management centre in Asia and thus there exists in this country a high concentration of fund managers. The entire investment operations in the country are under the strict guidelines and regulations of the Securities and Futures Commission. Among various investment options, unit trusts, mutual funds and other collective investment schemes are the major ones. Various types of insurance schemes and pooled retirement funds have also become part of the investment portfolio in the country. In the country the entire activities are controlled by the SFC and it published guidelines for regulating the trading of hedge funds in the market. As per this guidelines there are mainly three categories of hedge funds such as “single hedge funds, fund of hedge funds and hedge funds with a capital guarantee. “(Hong Kong investment funds 2009).
Various investment options available in Hong Kong are described below:
Banking Sector
In the banking sector fixed deposit is an important investment option offering high security and adequate return to the investors. The security is assured by the central bank. In case of bank investment, guarantee on return of investment is assured by the banks. Average rate of return on the investment seems to in the range of 8- 10 % on a compound interest rate. Liquidity is restricted in case of this method of investment. These types of investment involve lock in period of 5 years. The maturity amount is chargeable by the tax law. Investors requiring fixed rate of return on their investment with security cab adopt the FD as a suitable investment option.
The basic objective of investment is to generate profitable returns at an average rate of 15-20% per annum without considering market conditions. In Hong Kong, “The Land Banking investment also places a strong emphasis on capital protection and provides a fixed asset, which is fully registered with a sovereign provincial government body that has an “Aaa” rating from Moody’s.” (Investment production 2006).
Government /infrastructure bonds
It is a better investment option for the investors who seek security for their investment. Investment guarantee is not offered by the government. The investment on government bonds require minimum amount of HKD 100000/ USD 12,903 using today’s FX of 7.75. Return on the bonds issued by government and quasi government institutions are at an average rate of 2.5 – 8.7%. The maturity periods on various investment options are ranging from 1 year to 10 years. The span of yield calculation is based on the PV of all future returns together with coupon rate of each bond.
Mutual funds/ shares
Mutual funds are a suitable investment option for those who look for maximum return from their investment with adequate liquidity in the invested funds. The mutual funds return is influenced by the various market risks. Due to this the security on investment in the mutual fund is only limited in nature. The entire activities are controlled by the Securities Exchange Act. Return on investment in mutual funds is at an average rate of 15- 18% over a period of 8- 10 years. Liquidity is also offered in this investment as there is option for surrendering the investment at any time by the investor.
Equity linked savings scheme offered by banks
In this type of investment options, safety is subject to market related risks. The entire activities are controlled by the Securities Exchange Act. Higher rate of return exists with this investment option at an average of 15- 18% over a period of 8- 10 years. Higher liquidity is also offered as the investor can surrender their investment at any time they prefer.
Real estate – flats / buildings
Investment in real estate is beneficial as it offers investment guarantee with appreciation. Economic values and social threats are influencing the security on the investment. Rate of return on the investment can be expected at an average of 25- 40% within a period of 8- 10 years. The liquidity of the investment is subject to the demand and supply reactions in the real estate market. In case of favourable market conditions, investor has obvious further advantages with anytime surrender option.
The real estate market in Hong Kong is considered as a costliest and well-paid market. A major part of the nation’s wealth is in the form of buildings and land resources. The striking tax system existing in the country is forcing a large number of international business firms and corporations to invest in the country profitably. (Real estate investment in Hong Kong 2008).
Real estate plots
Real estate plots are a better investment option as it offers investment guarantee with appreciation. The security of the investment is subject to economic values and social threats in the environment. A rate of return at an average of 25- 40% is assured for the investment within a period of 8- 10 year. Liquidity of investment depends on the demand supply reactions in the market.
Gold & precious stones
Gold and precious stones are an attractive investment option as it offers higher liquidity as well as higher rate of return. The investment guarantee with appreciation makes it an adoptable investment option. The security is subjected to economic values and social threats. Anytime surrender option with the investment provides the investors with adequate liquidity.
8. Insurance products: In Honk Kong, life insurance products are an investment area as the return on the investment is assured by government guarantee. The fund transactions are subject to the strict guidelines of the government regulators and thus security is assured. 15 – 18% return can be expected on investment over a period of 10 -20 years. (Analysis of various investment options 2009).
Is any of the asset class unavailable to investors in your country?
The analysis on the investment diversification opportunity in Hong Kong region reveals that all types of asset class discussed above are available for the investors in the country. There is some restriction prevailing on the acquisition of the asset class in the economy on the basis of minimum amount requirements for investment. In case of government and quasi government bonds, the investment is start at a minimum of HKD 100000 (or USD 12,903 using today’s FX of 7.75). Thus this investment option is not accessible for lower level investors.
In case of hedge funds there also involve restrictions on minimum amount for making investment and it is equal to amount of $ US 50000. Thus hedge fund investment is also away from means of some investors in the country.
Hong Kong government Bonds are not guaranteed by the government and start at a minimum of HKD 100000/ USD 12,903 using today’s FX of 7.75 thus putting this option out of reach for some investors.
Whether any alternative is available for this?
As an alternative to these minimum amount restrictions on investment, lower level Investors can adopt the globally diversified investment portfolio. They can adopt other investment options available in the country such as corporate equity investment on diversified corporate basis.
Conclusion
Successful Investment diversification is possible in Hong Kong as the asset options are available to all the investors in the country. Investors can reduce their investment risk by opting for diversified investment port folio. Investors are better supported with favourable tax system and limited restrictions on investment. Thus in Hong Kong the issue of alternatives for investment does not exist.
References
- Analysis of various investment options 2009. Web.
- Hong Kong investment funds 2009, Lowtax.Net.
- Investment production: individual and institutional investment opportunities, 2006, TSI International Group Inc.
- Real estate investment in Hong Kongp: syndicate this article, 2008.