Date
4 December 2016
Insurers in Hong Kong have benefited greatly from mainland customers’ rush to buy overseas assets amid a weakening renminbi. Photo: HKEJ
Insurers in Hong Kong have benefited greatly from mainland customers’ rush to buy overseas assets amid a weakening renminbi. Photo: HKEJ

Yuan drop spurs mainland rush for Hong Kong insurance policies

How long does it take to swipe a card 200 times and get the paperwork all signed? The answer is about an hour, according the China Securities Daily.

But Hong Kong insurance agents are more than happy to go through such a card swiping marathon.

Recently, as the renminbi weakened beyond 6.7 against the greenback, expectations of more downside has prompted a fresh round of rush among mainland Chinese for overseas assets, such as Hong Kong insurance policies.

Compared with the pound sterling’s sharp decline since the Brexit vote, the 4 percent year-to-date fall in the renminbi is far less significant.

While we have not heard Britons rushing to sell the pound to avoid its further depreciation, mainland Chinese have reportedly been trying every possible channel to move their money abroad.

Fueled by better returns, more transparent terms and interest in foreign currency assets, mainland demand for Hong Kong insurance products have been robust in the past few years.

The recent bonanza may push Hong Kong insurance purchases to another record this year.

In a tightening move to stem capital outflow earlier this year, mainland regulators capped the limit on using China UnionPay cards to transfer money abroad for buying insurance policies at US$5,000 per transaction.

Soon after, multiple swiping became the standard way to get around the rules.

One strategy is to hold the policies for a few years and then cash out to get a lump sum in Hong Kong dollar or US dollar.

Afterwards, insurance customers can use that fund to buy other assets such as overseas properties.

Another common strategy is to use the policy as a collateral to borrow funds from banks and then immediately deploy it for investments in foreign securities, the daily reports.

Typically, insurance buyers can borrow about US$700,000- US$800,000 against a US$1 million policy.

Insurers would hook their mainland clients up with private bankers for the latter to help them set up a portfolio.

Bonds are said to be popular, including those of emerging markets. Unit trusts and stocks are also hot.

“We have a client who is a big fan of Apple Inc. He borrowed US$800,000 against his policy and invested all of that in Apple shares,” an insurance agent told the newspaper.

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RT/RA

EJ Insight writer

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