Inside Hong Kong’s Fintech Rise: What’s Drawing Global Firms In? | InvestHK’s King Leung

King Leung (0:00)

Hong Kong has surpassed Switzerland as now the largest cross-border wealth management center in the world. We are managing 5.4 trillion US dollar of private capital.

Tony Clark (0:11)

So that's 5.4 trillion of assets under management managed in region by wealth firms, asset managers that are based in Hong Kong.

King Leung (0:20)

Correct. Hong Kong is just a dot on the map, and yet we play a pretty important role in managing our investors' money. But last year, Hong Kong was ranked number one, and this year, number one again, as a number one fintech hub in the world. People were like, wow, how did this happen? We suspect it has a lot to do with how much Hong Kong governments embrace the development of the new finance, anything related to digital assets, totalization. This is something that's been going on for a good number of years now. The whole financial sector is almost due for a major upgrade on the financial infrastructure.

Tony Clark (0:58)

Hi, I'm Tony Clark and welcome to the London Fintech Podcast. Each episode, I speak to the people changing the industry to help you stay ahead of what's next in Fintech. This podcast is brought to you by NextWave Consulting, the firm that I founded in 2020 with one purpose, to help build better financial services through technology.

Enjoy the show and please do subscribe. If you run a financial services business, at some point, you face a version of this question. Where do we put the entity? Where do we license? Where do we hire? Where does the capital actually sit? It can be expensive, slow to undo, and usually decided on surprisingly thin information. My guest today spends his working life inside those decisions. King Leung is Associate Director General of Investment Promotion 2, InvestHK, the Hong Kong government's inward investment agency. His sectors accounted for 89 of the companies, and InvestHK helped set up or expand in the first half of this year.

Before government, he was a tech founder. His first business was seeded by Credit Suisse and a venture investor, and I gather a lecturer at Hong Kong University and early career, actually a management consultant with Booz Allen. So very much an entrepreneur and operator, not just a government official.

In June, he brought 25 Asian companies to Britain. So we're going to look at this from both directions. King, welcome.

King Leung (2:21)

Thanks for having me, Tony.

Tony Clark (2:22)

It's great to be talking to you.

It's a really interesting conversation for me. I haven't been to Hong Kong for over 25 years. And so my information is going to be dated. I think a lot has happened since and it's a really important region. So I'm really keen to underpack this and understand how firms are making decisions and who's moving, investing in Hong Kong and all of that.

King Leung (2:46)

Well, this is a very exciting times. In fact, when I was just having a meeting with a senior executive from a company from the US., in fact, they have been expanding their presence in Hong Kong. And naturally, we got into exciting conversations about some new policies championed by the Hong Kong government.

Anything from gold, commodities, wealth management, fintech, which includes tokenization, the cross-border payments, made the whole range of topics that are super exciting for different players in the financial space.

Tony Clark (3:29)

So let's just talk about that decision-making process. You see a lot of companies deciding where to base themselves. When a financial services firm is weighing up where to put their entity, where to put the company, what's actually at the top of the list? And how might that be different? That's five years ago.

King Leung (3:46)

It's actually a pretty strict forward question because when we talk to many founders, and in fact, I was a founder myself for a stretch of 18 years, in which I actually started three different companies.

Oftentimes when we talk to either founders or even VC investors, they almost always start with market sizing.

So then if you talk about, for instance, anything related to finance or fintech to be more specific, then you think about the market sizing in terms of the size of the capital markets, or the size of the wealth management market in terms of private capital, or the size of the financial ecosystem in the form of a number of financial institutions, from banks to asset managers to insurers. So, whichever dimensions that you look at in terms of all these metrics I just mentioned, Hong Kong is almost always high on the list. So therefore, when we talk to companies in finance or in fintech, in the past, at least the past seven years I've been with InvestHK, they almost always would put Hong Kong at the top of the list for expansion, outside of their home market. So market size is definitely one. Now, and secondly, when people look at a new market, of course, they have to find potential clients, they have to find investors, this is a given. But they are also very interested in understanding the policy direction. So then this is a good gauge for them to get a feel whether or not the landscape is somewhat changing, so that whenever there's a shift of landscape, that opens up opportunities for the new players, right? People would call this like a new dawn of the blue ocean, so to speak. So if you look at, I mean, again, this is all over the media, you look at how the hardworking policy makers have been, you would notice that really a lot of very exciting new policies related to the financial services sector, we are from the, I think, the waving of the carry interest, I mean, the waving of the tax on the carry interest for the hedge funds and asset managers, to the various very favorable policies on family offices which attract a lot of private investors in Hong Kong, and then you look at some of the other exciting new policies around gold, investment, and commodities trading. So all these things basically mean that there are a lot more new momentum injected into the finance ecosystem, so that creates many new opportunities, and that is super exciting at the time being.