Good News on Listing | Frost & Sullivan Assists Shengde Fortune in Successful US Listing (NASDAQ: PWM)

Investment highlights

Overview of Hong Kong Wealth and Asset Management Services Market

Generally speaking, wealth management refers to comprehensive services that include providing financial and investment advice, insurance services, retirement plans, legal or estate planning services to clients. Asset management refers to the active management of investors' portfolios by licensed financial service companies (usually investment banks). Asset management can also be part of wealth management plans provided by financial institutions.

Despite the sluggish global stock market in 2015, the wealth management industry in Hong Kong has experienced rapid growth in recent years. From 2015 to 2021, the market size recognized by the wealth management and asset management industries, calculated based on the income of institutions engaged in these fields, increased from HK$6306 billion to HK$10,076 billion, with an annual compound growth rate of about 12.4%.

Over the years, Hong Kong's multi-currency and multi-dimensional financial market infrastructure has continued to develop. As a result, financial institutions can conduct real-time transactions in major foreign currencies including the Renminbi through diversified financial intermediary channels. This helps reduce dependence on specific transaction channels and minimize the risk of systemic issues. Therefore, it is expected that Hong Kong's market infrastructure will continue to drive the stable development of wealth management and asset management services. By 2026, the market for these services is expected to reach HK$1,275.9 billion, with a compound growth rate of 4.4% from 2022 to 2026.

Shengde Wealth currently provides services to high-net-worth and ultra-high-net-worth individuals from various regions of Asia, especially those from China or Hong Kong, in Hong Kong. For the fiscal year ending September 30, 2020, Shengde Wealth's wealth management business falls under wealth management services - insurance services. The company introduces clients to insurance brokers who assist them in determining wealth management products to meet their needs. Regarding the company's asset management business, as a licensed asset management service provider in Hong Kong, Shengde Wealth offers asset management products and services to clients. Although the company may expand into other areas of wealth management services such as retirement planning, legal or estate planning, or other services, it currently does not have such plans.

China's demand for insurance policies is constantly rising

With the vigorous development of China's economy, per capita disposable income in China has experienced strong growth over the past decade. The state social security fund cannot meet consumers' growing expectations for healthcare, as well as wealth and asset protection for Chinese investors. Therefore, relying on Hong Kong's robust financial services industry regulatory system, an increasing number of Chinese investors have been seeking comprehensive asset and wealth protection, as well as medical insurance policies in the Hong Kong insurance market over the past decade. They directly invested more than $549.6 billion in Hong Kong at the end of 2021, with a compound growth rate of 4.4% from 2015 to 2021.

The Insurance Authority of Hong Kong (IAHK) is an independent institution located in Hong Kong, with the mission to regulate and protect policyholders through effective supervision, enhanced professionalism, and public participation. According to IAHK data, in 2021, 3.5% of long-term insurance products sold in Hong Kong were sold to Chinese tourists. The term used by IAHK refers to mainland residents who visit Hong Kong with an Exit-Entry Permit or a Chinese passport. Among the insurance policies purchased by Chinese tourists in 2021, 36.1% were life insurance and 48.2% were critical illness insurance.

According to our Chinese lawyers, mainland Chinese residents are not prohibited from purchasing insurance in Hong Kong as Chinese tourists. As one of the most cost-effective and competitive insurance markets in Asia-Pacific, premiums from Asian tourists, especially Chinese tourists, play a more important role in Hong Kong's long-term insurance market (any term exceeding 5 years). It is estimated that by 2026, approximately 10% of long-term insurance premiums will be paid by Chinese tourists. Therefore, China's expanding middle-class population represents an important source of buyers for Hong Kong insurance products and is expected to further drive the development of the Hong Kong insurance market.

Source: Frost & Sullivan report

The premiums for long-term insurance products purchased by Chinese tourists have seen rapid growth in recent years, mainly due to the expansion of the entire life insurance market. The premiums for long-term insurance products in Hong Kong have increased from $74.3 billion in 2015 to $86.9 billion in 2021, with a compound annual growth rate of 2.6% from 2015 to 2021. The percentage of policies purchased by Chinese tourists has slightly decreased from 5.5% in 2015 to 3.5% in 2021, with a compound annual growth rate of -7.3% from 2015 to 2021.

The reduction in business premiums for Chinese tourists purchasing long-term insurance products is mainly due to the COVID-19 outbreak in Hong Kong and border lockdown measures between Hong Kong and the Chinese mainland, which have significantly reduced the number of mainland tourists. As a result, this has had a negative impact on the premiums for 2021 purchases by Chinese tourists. Looking ahead, the insurance market is expected to recover and reach $111.8 billion in 2026, with an annual compound growth rate of 3.8%.

Source: Frost & Sullivan report

*The above order is not sequential and is arranged in reverse chronological order based on listing time.