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Recently, JPMorgan Chase carried out a large-scale transfer operation in the Hong Kong stock market.

From August 5 to August 20, JPMorgan Chase's Hong Kong holdings fell from 4th to 16th, with the market value of its holdings falling from HK$1.31 trillion to HK$187.06 billion, involving a capital scale of more than HK$1.1 trillion. It is worth mentioning that JPMorgan Chase had also carried out a similar large-scale transfer operation in July, involving more than HK$600 billion.

(Photo source: Zhitong Finance APP)

In July, JPMorgan Chase transferred about 1,400 stocks, involving HK$680 billion, accounting for more than 33% of its Central Clearing and Settlement System (CCASS). In this transfer, a large number of stocks including Tencent Holdings, Alibaba and AIA were transferred out.

JPMorgan Chase said earlier thatThe local custody business in Hong Kong and Taiwan will be outsourced, with the Hong Kong market being taken over by HSBC and the Taiwan market being managed by Standard Chartered Bank. The goal is to complete it before the end of this year.

It can also be seen from HSBC's position overview and recent changes that it has completely taken over JPMorgan Chase's transfer out action.

(Photo source: Zhitong Finance APP)

How will my service features change if I switch to HSBC?

Hong Kong and overseas investors purchase stocks through Hong Kong brokers (or custodians), and overseas investors generally prefer to choose a single custodian. According to a report by Global Investor,Most of the world's well-known investment institutions tend to choose a custodian institution for service(The reason why there are five or even more than ten is probably because they focus on global investment and choose different custodians in different regions.) In addition, some institutions (such as US mutual funds) generally prefer to choose one custodian for transactions due to complex regulatory requirements and custody arrangements.

To some extent, the trustee willThe manager makes the selection.In its 2019 survey, Global Investor gave the weighted average score and simple average score of the asset management scale of different institutions. It can be seen that the weighted scores of JPMorgan Chase, HSBC, Citigroup, etc. are generally higher than the simple average score, which shows that they tend to acceptFunds from major customersIn contrast, Pictet, BNP Paribas, and RBC tend to accept funds from small clients.

Custodians often target different groups and provide differentiated services.Global Investor's 2022 survey shows that JPMorgan's strength lies in its customized services such as client reports, technology, and service quality (bottom of the picture below), while HSBC's strength lies in providing regulatory support (top of the picture below); therefore, HSBC's customer base is relatively mainly larger mutual funds, while JPMorgan's customer base is relatively mainly asset management companies or hedge funds.

JPMorgan's withdrawal from local custody is a business strategy adjustment

It is reported that the local custody business mainly involves transaction processing and accounting services when customer funds enter the market, while the global custody business manages cross-border investments and maintains relationships with customers through its huge network. Compared with the global custody business,Local hosting business is often seen as a low-margin business。

JPMorgan Chase's client assets under management (AUC) as a local custodian in Hong Kong and Taiwan are worth approximately US$520 billion, a large asset size that reflects its importance in the regional market.

However, due to the decline in assets under custody in recent years, which has led to a decline in profits, JPMorgan Chase has decided to exit some local custody businesses in the Asia-Pacific region, including Hong Kong and Taiwan. This decision is consistent with JPMorgan Chase's strategy in other Asia-Pacific markets (such as Australia and South Korea), which is to exit local custody businesses with lower profit margins to optimize resource allocation and reduce costs.

Overall, JPMorgan Chase's decision to exit local custody business in Hong Kong and Taiwan is part of its business strategy adjustment, aimed at optimizing resource allocation, reducing costs and focusing on more profitable global custody business.

As for the view on the Hong Kong stock market, Liu Mingdi, chief Asian and China equity strategist of JPMorgan Chase, publicly stated that since the end of October 2023, JPMorgan Chase has begunOverall bullish on Chinese stocksHe believes that if the performance of Chinese companies improves in the future and asset prices tend to stabilize, foreign capital may further increase its allocation to Chinese stocks.

Despite the large-scale transfer, JPMorgan's long positions in Galaxy Entertainment, China Duty Free Group, Ganfeng Lithium, China National Pharmaceutical Group, Xinyi Glass, and COSCO Shipping International all showed positive changes in the week ending August 20.China Duty Free H-share long positionIt rose to 8.08% on August 15, an increase from the previous 6.81%.

Recently, JPMorgan Chase’s official WeChat account updated the latest hot job recruitment information in China.

"The enthusiastic participation of international investors in the conference fully demonstrates their continued interest in the Chinese market and their active pursuit of various channels to deepen their understanding of the Chinese market so as to make more informed investment decisions," said Peter Ho, Chief Financial Officer of Asia Pacific and Co-CEO of China at JPMorgan Chase.

JPMorgan Chase is also the only foreign financial institution that has wholly owned banks, securities, futures and asset management companies in China. He Yaodong said that thanks to the accelerated pace of opening up of China's financial market in recent years, JPMorgan Chase has been operating in China for 103 years.And continue to increase investment in the Chinese market。

Those rollover behaviors of different nature

Speaking of the most eye-catching transfer in recent years, Tencent's major shareholder, South African media giant Naspers, and its Internet investment flagship Prosus deposited a large number of Tencent shares into the Central Clearing and Settlement System (CCASS) in order to gradually reduce their holdings.

Unlike JPMorgan Chase's transfer of shares to HSBC, this type of major shareholder depositing shares in CCASS, especially large-scale deposits, is likely to mean that there will be trading actions in the future.

For example, on June 19, Chinese Estates Holdings deposited 231 million shares (accounting for 12.1% of the issued shares) in physical form into CCASS and transferred them to BNP Paribas.

(Stock price trend of Chinese Estates since June 19, source: Zhitong Finance APP)

According to the 2023 financial report of Chinese Estates Holdings, Liu Luanxiong and his wife Chan Hoi Wan hold 74.99% of Chinese Estates Holdings, or about 1.421 billion shares. Among them, 230 million shares are held by "Joseph Lau Luen Hung Investments Limited", which is very close to the transfer data of Chinese Estates Holdings on June 19.