On 22 February 2017, the Financial Secretary’s budget speech outlined a number of initiatives designed to reinforce Hong Kong’s status as an international financial centre. Below are some highlights for the asset management sector.

Regulatory regime – AML

The Financial Services and the Treasury Bureau (FSTB) has conducted two consultations on legislative proposals to address perceived deficiencies in the anti-money laundering and terrorist financing regime. For a summary of the proposals, see our January publication Recent proposals for HK’s AML regime – impact on SFC regulated entities. The Government aims to introduce the relevant amendment bills into LegCo for scrutiny in the middle of this year.

Fund industry

Profits tax exemption for private funds: The Government proposes to extend the profits tax exemption, currently enjoyed by offshore private funds, to onshore privately-offered open-ended fund companies. The FSTB plans to consult the industry on legislative proposals in the near future.

Mutual recognition: The speech highlighted the Memorandum of Understanding signed last year with Switzerland, which allows eligible public funds in Hong Kong to gain access to the investing public in the Swiss market through a streamlined vetting process. The SFC is actively negotiating similar mutual recognition arrangements with other jurisdictions.

Bond connect: The speech confirmed that the Government is studying ways to facilitate the participation of mainland and Hong Kong investors in the bond market. Media reports have subsequently quoted the Chinese premier on the planned introduction of “Bond Connect” by the year end.

eMPF: The FSTB is establishing a working group to explore the development of an electronic MPF management platform to enhance administrative efficiencies “thereby providing room for fee reduction”.

The full text of the budget address is available here.