Hong Kong's wealthiest citizens are facing some tricky investment decisions, as the slowdown in China's economy and the crash in the Shanghai stock market hits the appeal of investing close to home.
However, instead of moving their funds in to Europe—despite the comparative resilience of the region's stock market and abating in fears around Greece—the region's residents are looking further afield to developing markets in Latin American and Africa.
"Similar to China, HNWIs (high net worth individuals) in Hong Kong prefer to keep their investments closer to home, with nearly 60 percent of their foreign assets invested in Asia Pacific in 2014, largely in financial services sector. However, with a rather grim regional economic outlook as the Chinese's economy continues to slowdown and the impact of Shanghai stock market crash is taking its toll widely than expected, local investors are now forced to 'diversify' and 'select' where they want to invest," said Roselyn Lekdee, economist at WealthInsight, in a report on Thursday.
The wealth research company forecast that Hong Kong millionaires' investments in Europe would fall to 4.9 percent of foreign HNWI assets by 2019. That would be down from 7.2 percent in 2014 and 11.7 percent in 2010, indicating a trend of millionaires' looking further afield.
"Emerging markets such as Latin America and Africa have become more attractive due to larger profit margins in their investment opportunities, particularly in FMCG (fast moving consumer goods), infrastructure and impact investments," said Lekdee.
Hong Kong's wealthy population is expected to grow strongly over the next five years, with WealthInsight forecasting the region will be home to more than 230,000 millionaires by 2019. Foreign asset holdings are expected to reach US$546.1 billion by then, accounting for 38.2 percent of the country's total HNWI assets.
As of last year, Asia-Pacific accounted for nearly 60 percent of Hong Kong millionaires' foreign assets, followed by North America with 17 percent, Latin America with 11.5 percent, Europe with 7.2 percent, Africa with 3.1 percent and the Middle East with 2.7 percent.
The number of Hong Kong billionaires is also expected to increase by the end of the decade. Between 2010 and 2014, the number of billionaires rose to 53 from 34 and WealthInsight forecasts a further 11 billionaires will be created in the next five years.