Buy Side Coming To Hong Kong?
Hong Kong is one of the most business friendly environments in the world with corporate tax rates as low as 17.5%. It has a world class legal system, a highly educated work force, is the gateway to China, and a dynamic financial infrastructure that most nations rue. While there has been much speculation whether Hong Kong will be usurped by Shanghai as the premier financial center of China its not likely to happen for many years to come.
As a Buy Side what should you consider when setting up shop in Hong Kong? You will need an office space, technology, an affordabale service oriented broker, a place to live, a work visa, a registered company, a bank account, a bookkeeper, regulatory approval and a number of staff depending on the size of your operation.
The financial center of Hong Kong is an area called Central. Since its founding in the early 19th century Central has always played a “central” role in the city’s investment community. As such, rates for office spaces in Hong Kong are akin to office spaces in any of the major financial centers of the world. Commercial rentals in Central can range from USD3 per square foot up to USD20 per square foot per month. If you are willing to have an office in another area outside of Central you can definitely lower your rental expenditure.
Your office will need some computers, a fax, a printer and some telephony. Asia is the manufacturing center for most of the premium computer brands in the world and you can get the technology you need very affordably. For example 2 computers with 2 monitors each, a fax and a printer will cost less than USD2000. Of course, enterprise solutions are available too. You may recall that China-based Lenovo bought IBM’s consumer computer division a few years back.
Registering a company in Hong Kong is quite easy. First you must choose a company name. Then submit an Incorporation Form and a copy of the company’s memorandum of association and articles of association. You will need 1 director, 1 secretary and a registered business address. Fees vary from 200USD for company’s with share capital or 150USD for company’s without. Keep in mind the registered office must be based in Hong Kong. Depending on the nature of your business you may require a business license too including documentation for the Securities and Futures Commission.
Living in Hong Kong is a unique experience. Given how easy it is to get around very affordably, the efficient government bureaucracy and the high quality of service in Hong Kong it won’t take long to get accustomed to your new home. Hong Kong residences tend to be smaller than those found in the west and depending on where you wish to live the rental prices can vary greatly. You can rent 600 square feet for anywhere from USD1000 per month up to USD 2000 per month close to Central. If you have a family there are several family oriented communities in Hong Kong. Entry level units of around 1400 sq feet will start around USD4000 per month and can easily go to USD15,000 per month depending on your needs.
But of course to live in Hong Kong you will need a Visa which can take anywhere from 6 to 8 weeks depending on how thorough the documentation you submit is and how complex your needs are. After you’ve setup your company it becomes the entity that will serve as your visa sponsor. Hong Kong will also grant a dependant visa to your spouse too so they will have an option of finding a job.
The brokerage community offers a wide spectrum of services from local retail brokers, to multi-market agency brokers up to tier 1 banks with a full suite of investment services, connectivity options and most any asset class you desire to trade in. There over 500 Exchange Participants on the Stock exchange and 206 Exchange Participants on the futures side just in Hong Kong alone. Moreover you can trade any of the Asian markets from Hong Kong and have access to the major listings of China too.
You can trade over the phone if you wish but that comes with great cost in the form of higher brokerage and slippage. You’ll want a software vendor if you plan to to trade electronically however. Hong Kong has a wide range of vendors from Fidessa and Sungard to Trading Technologies and Patsystems all ready to give you their best sales pitch. Whether you want an enterprise OMS or a simple click trader application you are sure to find it in Hong Kong.
The 800 words in this article merely scratch at the surface when considering a move to Hong Kong. If you are a buy-side serious about coming to Hong Kong please feel free to contact me to help you get started.