Mainland customers may temporarily delay offshore purchases.
Growing awareness of China’s existing tax rules on overseas investment income is expected to cause short-term volatility for insurers and banks in Hong Kong.
The ratings agency expects sales to mainland Chinese customers to slow temporarily as customers consider the tax implications of buying offshore insurance and investment products, according to S&P Global Ratings.
In a report titled China’s Offshore Tax: Core Demand Cushions Hong Kong Banks And Insurers, S&P Global Ratings said the slowdown is likely to affect both banks and insurers as more mainland customers assess their tax obligations.
Despite the expected volatility, the agency expects underlying demand for Hong Kong’s offshore financial products to remain resilient.
Life insurers are expected to maintain growth of about 8% to 10% over the next two years, supported by continued demand from customers.
Hong Kong banks, meanwhile, are expected to manage a temporary decline in fee income.
S&P Global Ratings said their diversified wealth management platforms and a shift in product mix should help limit the impact.
The report indicates that whilst greater awareness of offshore tax rules could affect sales in the near term, it is not expected to significantly weaken the underlying demand for Hong Kong’s banking and insurance services.
