Fintech has taken off across the world in recent years and companies in Hong Kong’s financial sector are pursuing innovation to enhance safety and protect clients’ assets.
Ms Zhu Yali, Head of Fintech and Retail Business of Huatai Financial and Zhangle Global App, believed Hong Kong’s financial sector, including small and medium securities firms, needed to forge new paths and control costs amid a volatile global economy.
Small and medium securities firms create win-win synergy
The business models of small and medium securities firms had been relatively homogenous, Ms Zhu observed. They relied heavily on the stock market, leaving them vulnerable to declines of commissions when trading volume falls. During the COVID-19 pandemic clients became used to online trading, putting pressure on traditionally offline-dependent firms.
Looking for new revenue sources became critical for smaller securities firms. In addition to enriching product categories to provide more financial products and services beside stocks, they should expand client bases and focus on more competitive niches.
As a fintech innovator, Huatai International last year noted business challenges small and medium securities firms faced, and so opened up the Zhangle Global app (ZL Global) platform for partnerships.
After joining the platform, smaller securities firms could maintain relationships with clients and refer them to ZL Global to trade securities, expanding investment choices for investors. ZL Global in turn provides securities firms with middle- and back-office support, including clearance, settlement, placing orders and risk management. Member securities firms can focus on customer service to generate commission income without having to fork out operational costs on developing or optimising online systems.
Making the cake bigger had been Huatai’s strategy all along, Ms Zhu said. It did not see industry counterparts as competitors but prospective partners to collectively build and expand the market.
Global economy on two tracks
Ms Zhu believed the global economy would develop along two tracks this year, with developed economies slipping into recession while Mainland China would expand.
Interest rates would continue to rise for a little longer in the US but inflation would moderate so the Federal Reserve may stall rate hikes.
Cash is King remains primary investment strategy
In this macroeconomic environment, Ms Zhu thought cash is king should remain the key investment strategy for the first half of this year. As the Hong Kong dollar was pegged to the US dollar, rate increases in the US would continue to put downward pressure on the value of assets.
“First of all, cash is traditionally a safe-haven asset, and maintaining liquidity is more important in a volatile market. Also, cash can give investors the resources to capture short-term market opportunities. Lastly, it’s advisable to invest in assets linked to rate hikes during the hike cycle. That makes cash a very good choice.”
Huatai International’s one-stop global wealth management platform ZL Global leverages technology to integrate brokerage business into wealth management. The platform opens up to small and medium securities firms for partnership. In May last year, Huatai International introduced Cash Pro for investors to earn income from idle cash
Liquidity management becomes SME’s key concern
Noting that no single investment product could achieve all three investment objectives of high returns, high safety and high liquidity, Ms Zhu said liquidity management, whether for individual investors or SMEs, would become a major investment consideration for this year.
“If SMEs and investors want to enjoy investment advantages during rate rises, then short-term investment tools can give them more flexibility with higher returns, and it will also allow them to maintain liquidity and prevent cash from depreciating.”
The ZL Global app last year introduced the Cash Pro, an automated cash-management service that generates interest daily, giving investors the flexibility to manage idle cash while awaiting market opportunities, maximising idle fund use. [1]
Such investment products were usually for individual investors but Ms Zhu said: “Surprisingly, it’s also popular among small companies. The reason is that bank deposits are not providing high-interest returns and term deposits have long lock up periods that lower a company’s capital liquidity. With Cash Pro, the idle cash in clients’ accounts automatically subscribes to the fund exclusively distributed by Cash Pro on every trading day.”
HKTDC, Huatai team up
The Hong Kong Trade Development Council (HKTDC) and Huatai International have announced a strategic partnership to jointly promote the national Dual Circulation Strategy. The partnership is set to achieve three key objectives. Firstly complementary strategy in helping mainland enterprises go global, while attracting foreign investment into the GBA, thereby achieving a triple-win outcome for the project owners, investors and the Hong Kong service providers and advisers. Secondly, reinforce and promote Hong Kong as an effective platform for mainland enterprises to invest overseas. And thirdly, create strong synergy by integrating the two parties’ business platforms and investor and resource networks.
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[1] The ChinaAMC Select Stable Income Fund (The Fund) linked to Cash Pro service aims to pay dividends on a daily basis. The fund manager will decide whether or how often dividends will be paid, based on the attributes of the underlying investment products. There is no guarantee on the dividend payout rate and whether dividends will be paid regularly. The fund may distribute dividends out of share capital which may reduce the net asset value per unit. Investors should read the Fund offering documents for details of the Fund's dividend payout policy.
Disclaimer:
This article should not be construed as an offer or solicitation to subscribe to, buy or sell any funds. Please read and understand the offering documents and risk disclosure statement before investing.
