Hong Kong’s fund industry is graded "average" this year, improving from a grade of slightly below average in 2016. Singapore’s fund industry also received a grade of average, up slightly from 2016.
In the study, countries and regions were evaluated from four perspectives, regulation and taxation, disclosure, fees and expenses, and sales.
Regulation and taxation is the area that Hong Kong recorded a decline in grading. Despite multiple regulators governing Hong Kong's fund industry, the GFIE report suggested that a presence of a single and independent regulator in the fund industry would ideally strengthen the enforcement and scrutiny.
On taxation, investors are not levied any tax on fund investments. Of 25 countries studied, only Hong Kong and Singapore have this zero-tax feature.
However, in Hong Kong, the government does not provide any tax incentives for investments of retirement purpose, which the report cited as a minus.
Fund fees are still high, the report said. Hong Kong and Singapore are among only five countries worldwide that have the highest median fees for fixed income funds (>1.31%). Among equity funds, Hong Kong and Singapore are in the second highest fee bracket (1.76% to 2.00%).
In the category of sales, Hong Kong and Singapore both rated above average. Morningstar said the ranking was based on “markets that provide investors the greatest choice of fund options but without biased advice that can be driven by commercial, rather than investment, considerations”.
Likewise, both locations ranked high on disclosure. The study said that over 80% of funds in Hong Kong are sold through an open-architecture system, and investors must receive a prospectus prior to the purchase of a fund.
In Singapore, “more than 80% of funds are sold through intermediaries offering funds from multiple providers. Advisors are required to disclose conflicts of interest, such as being tied to a specific provider".
The study ranked the US fund industry at the top this year. Ten Asia-Pacific countries and regions were studied and they earned a grade between above average and average.
|Country||Overall||Regulation and taxation||Disclosure||Fees and expenses||Sales|
|United States||Top =||Below Average =||Top =||Top =||Average =|
|Hong Kong||Average ↑||Average ↓||Average ↑||Below Average ↑||Above Average =|
|Singapore||Average ↑||Above Average =||Average ↑||Below Average =||Above Average =|
|China||Average ↑||Average =||Average =||Below Average ↑||Average ↑|
|Taiwan||Average ↓||Average =||Above Average ↓||Bottom =||Above Average =|
|Thailand||Above Average ↑||Average =||Above Average ↑||Above Average ↑||Below Average =|
Source: Morningstar. Symbol denotes comparison to the 2016 study.