Australia’s visa-linked investment program is losing favor with Chinese millionaires, who previously invested heavily in bonds and real estate to get residency permits.
This time, they’re turning up their noses on small-cap stocks, with just 19 people filing applications since the government overhauled the investor visa program in July.
The new rules require visa applicants to put at least A$1.5 million (US$1.1 million) of the A$5 million they need to spend in the country into smaller equities and another chunk into venture capital, according to Bloomberg.
The old system, which was in place since 2012, drew more than 1,600 applicants primarily from China.
It allowed them to choose low-risk government debt or popular property investments.
The developments are frustrating fund managers who were hoping for an influx of cash. Australian small-company shares are less volatile and much cheaper than their equivalents in China, which have been at the center of a stock boom and US$5 trillion bust.
“It’s been a slow start,” Douglas Loh, the Melbourne-based head of equities at Acorn Capital Ltd., which oversees about A$600 million, said.
Millionaire migrants, almost all from China, plowed A$3.8 billion into Australian assets since the government created the visa category in 2012.
Eight Investment Partners and Acorn Capital are among firms with new small-cap equity funds to cater to the anticipated demand.
“It will take some time to get the message through that equity risk can be managed — that the Australian market is not a trading market like you see in China,” said Acorn’s Loh.
“The Chinese market is so volatile but if you look at the Australian market it’s steady as she goes.”
Australia retooled its Significant Investor Visa away from government bonds and residential real estate, assets that already attract large capital flows, toward investments that boost the country’s long-term economic future.
Under the new rules, applicants must spend A$500,000 on funds investing in startup and small private companies, A$1.5 million on small-cap equity funds, and the other A$3 million on managed funds across Australian listed securities, eligible corporate bonds or notes, annuities and property.
They need to stay invested for four years and live in Australia for 160 days of that period.
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