The annual survey of fund management activities released by the Securities and Futures Commission (SFC) shows that fund management in Hong Kong rebounded strongly last year.

The SFC says that the latest survey indicates that international investors continued to use Hong Kong as the platform for investing in the region, with fund management business growing to just over HKD8.5 trillion (USD1.1 trillion) as at the end of 2009, representing an increase of over 45% compared to 2008.

Overseas investors contributed almost HKD5.4 trillion (or nearly 64%) to that business, excluding real estate investment trusts (REITs). Meanwhile, the SFC has pointed out that an increasing number of Chinese mainland-related firms gained exposure to global investment practices via Hong Kong, using it as a springboard.

Licensed asset management and fund advisory houses continued to contribute the largest proportion of the combined asset management business in Hong Kong, recording the biggest year-on-year increase of 50% in the value of their aggregate asset management and fund advisory businesses, to a total of HKD6.45 trillion in 2009.

In addition, registered financial institutions recorded an almost 30% increase in their aggregate asset management and other private banking businesses, to HKD1.8 trillion last year.

Non-REIT asset management business increased by 57% to more than HKD5.8 trillion. Of this amount, HKD3.5 trillion worth of assets were managed in Hong Kong, with over 80% of these assets being invested in Asia. The market capitalisation of SFC-authorised REITs expanded 60% in 2009.

The report also highlights the growth of the exchange-traded-fund (ETF) market in Hong Kong, and the first-time cross-listing of ETFs in Hong Kong and Taiwan. As at the end of June 2010, 62 ETFs were listed in Hong Kong. The trading volume of the ETFs increased by 12.5% to an average daily turnover of almost HKD2 trillion in the year to June 2010, while their market capitalisation rose 30% to HKD180bn in the same period, making Hong Kong the second largest ETF market in Asia.

The report also notes the increasing number of mainland-related financial institutions setting up operations in Hong Kong. The total asset management and fund advisory businesses of mainland-related companies that participated in the survey increased 70% in 2009 to HKD155bn.

“The asset management industry in Hong Kong has proven its mettle in 2009. As other major markets around the world continue with their financial market reforms, we must work together with the industry to make sure that Hong Kong continues to be a quality market and a platform of choice,” said Alexa Lam, the SFC’s Deputy Chief Executive Officer.

The report notes that the SFC has conducted and concluded a number of consultations in 2009 and 2010. In particular, following such a consultation, a consolidated products handbook has been introduced to regulate different investment products, with other new measures to enhance investor protection.

With the aim towards enhancing the regulatory regime of REITs and providing better protection for minority shareholders, the Codes on Takeovers and Mergers and Share Repurchases have been extended to REITs. The application of the market misconduct and disclosure of interests provisions in the Securities and Futures Ordinance has also been extended to all listed collective investment schemes.