Escalating tensions in the Middle East could strengthen Hong Kong’s ambitions to become a global family office hub and gold trading centre, as wealthy investors reconsider their exposure to the region, industry figures say.
“The war in the Middle East could benefit Hong Kong because wealthy individuals in the region may want to move part of their investments outside the conflict zone,” said Kenny Tang Sing-hing, chairman of the Hong Kong Institute of Financial Analysts and Professional Commentators.
“Hong Kong is a natural choice for wealthy Middle Eastern and international investors who previously allocated funds to Dubai, given our deep capital markets, free flow of capital and strong regulatory framework,” Tang said.
“With no war here, Hong Kong remains a safe market for high-net-worth investors looking to invest in gold and other wealth products.”
The geopolitical tensions come just days after Financial Secretary Paul Chan Mo-po outlined plans in his budget to develop Hong Kong into an international gold trading centre.
The government said it would introduce measures including tax incentives, expanded gold storage capacity and the development of a broader gold trading and clearing system.
The conflict could reinforce that strategy, as investors might view Hong Kong as a more stable location than Dubai, which has spent the past decade promoting itself as a major gold trading hub, according to Brian Fung Wei-lung, CEO of the Hong Kong Gold Exchange.
“Dubai has been the leading financial centre in the Middle East. It not only attracts gold investors and family offices in the Middle East to trade there, but many central banks and international investors also use Dubai as a gateway to invest in the Middle East,” Fung said.
“Dubai now faces a lot of uncertainty as we do not know how long the war between the US and Iran will last,” Fung added. “Logistics would be a major concern for investors, as travel in and out of the city may become difficult and there are fears that gold and other assets, could be locked up by the tensions.”
Such concerns could encourage international investors, central banks and family offices to increase allocations to Asian markets, particularly Hong Kong and Singapore, he added.
Gold prices have been volatile amid the geopolitical tensions. The metal rose about 1 per cent to around US$5,164 per ounce on Wednesday afternoon after earlier falling roughly 6 per cent to about US$4,995.
“Hong Kong is considered politically more stable than many Middle Eastern countries – it has a strong legal system and is free from conflict,” said Tommy Ong, the managing director of T.O. & Associates Consultancy.
Hong Kong could position itself as an offshore yuan-denominated physical gold hub. Direct trading between the yuan and other Asian and Middle Eastern currencies would encourage investors from those regions to store their gold and yuan assets in the city, Ong said.
The government is also moving to strengthen the city’s appeal to family offices. Authorities plan to introduce a bill to the Legislative Council in the first half of this year to expand the types of investments eligible for tax concessions for family offices and funds.
The proposed changes would extend exemptions to assets such as private credit, gold and other commodities, carbon credits, insurance-linked securities and certain digital assets, Secretary for Financial Services and the Treasury Christopher Hui Ching-yu told lawmakers on Monday.
At present, only traditional investment products such as stocks and bonds qualify.
Singapore remained Hong Kong’s most direct regional competitor for attracting family offices and gold trading activity, Fung said, noting that the city state had introduced a range of incentives in recent years.
Tang, however, argued that Hong Kong still held an advantage.
“The overall stock and capital markets in Singapore are smaller than those in Hong Kong. Many family offices that initially set up in Singapore have relocated to Hong Kong to tap broader investment opportunities,” Tang said.
Anderson Cheung, managing director of global commodities at Best Profit Capital, said Hong Kong could also compete strongly with Singapore as a gold trading hub.
“Indian and Turkish investors currently trade most actively in Dubai, but some may consider shifting activity to Hong Kong because we offer yuan-denominated gold trading and have strong logistics for storing and transporting bullion,” Cheung said.
Hong Kong also had larger gold storage capacity and more refineries than Singapore, Cheung said, noting that Airport Authority Hong Kong and financial institutions were building facilities that could lift total storage capacity to more than 2,000 tonnes within the next three years – about double Singapore’s estimated 1,000 tonnes.
Cheung added that the city currently hosted two internationally recognised gold refineries – Germany’s Heraeus Hong Kong and Japan’s Metalor Hong Kong. A third refinery, mainland-backed Point Gold International, is expected to begin operations in Hong Kong in October. -- SOUTH CHINA MORNING POST
