北京拟扩大个税征收范围，香港保险股银行股承压

It's 9 a.m. in Shanghai, Shenzhen, and here in Hong Kong, you're watching the Chinese show. I'm Able Hong with David. And. Good. Good morning. We're coming down to the open markets in Greater China. Let's get to your top story tonight. Top stories today plural. Uh we're looking at markets right now. Stocks as you can see on the benchmark basis under pressure. That's after this tech led rally on Wall Street falters. You have gold of course which is the big story as well, extending, uh, its gains following its best in six months.

While the dollar sinks to a two month low. Big insurers and banks are set to drop in Hong Kong on reports that Beijing plans to expand its personal income tax to cover policies sold in the financial hub. And China restricts the exports of drones to the US as part of a barrage of measures in retaliation against recent US cuts. So looking at the market reaction and our into the Asian session, we're seeing the memory names getting hit at all times too.

Um SanDisk write that disappointment. And thankfully I think investor focus is now shifting to the Hang Seng the internet platform names as they look like they have a better shot of perhaps monetizing all that eye investment. And this is coming at a time. Maybe we see a rotation away from Hang Seng financials as well. Given this crackdown that we're seeing. Right. It's certainly going to intensify the rotation out of financials, which have done well.

And of course, the news flow certainly is uh, to your point supportive of that. And I think what's interesting to your point too, is you are getting the usual tailwinds, but you're not getting the usual effect in markets. Right. So you have tighter spreads, you have lower oil prices, you have a softer dollar, but yet you have a benchmark which is down one tenth, about 1%, let's call it that. And I guess to your point right there, the the I story tied to the US seems to be the drag today, and I think we'll see that.

Right. So let's have a look at where we are as far as markets go. Because you know, we're looking at the session today against softness in most parts of the equity complex. It might be different in Hong Kong and within Hong Kong which we'll get to in a moment there. But yes, in case you're joining us now over the first time in 24 hours, that's right. Gold is close to 45 than we are to, for there had been a decent pop overnight going into this morning which we are extending right now.

Speaking of gold, uh, a couple of minutes to tell you about. You have one, of course, in Oz you have earnings coming to write a GBS hon hai is indicative of the AI story out with monthly sales up a 50%, I think was what the company reported for July. And of course, Sky, next to the point Apple just made is indicative of the memory drag we're getting, uh, today. Right. Uh, A50 futures coming up on your screens, uh, that we should have dollar Hong Kong and China on your screens.

We don't have a dollar. Hong Kong talk about that. Anyway, we can talk about that later. But yeah, that's 60, 74, 66. We are the stronger strong guest level here on offshore and onshore since about uh early of 23. Mhm. We are watching of course the insurers when markets open in a few minutes, this after the banks and insurers exposed to mainland Chinese wealth flows. We already saw the market reaction in London following the timing report that Beijing was closing a key tax loophole for Hong Kong insurance policies.

For more we're joined by our North Asia chief correspondent Steve Angle, and Bloomberg Intelligence Asia Pacific insurance analyst Steve Allen. Uh, Steve, let's start with you. I mean, what do we know so far about the extent of this potential crackdown? Well, we do know that Beijing has been trying to increase, obviously, its oversight of cross-border wealth and also improve tax transparency. Uh, you know, these reports are coming out of Tyson Global, which is a fairly independent news organization in China, and they are looking at how the authorities are potentially going to be adding, uh, dividends and returns from these tax policies that so many mainland Chinese when they come to Hong Kong, for example, uh, buy up these policies.

And that's been a big source of growth for many banks and also insurance companies. Air, Prudential, HSBC have been increasingly relying on selling these policies. Uh, but now Titan Global is essentially saying as another step in Beijing's efforts to do what I just said, uh, basically, uh, strengthen oversight of cross-border wealth, improve tax transparency. They're going to be adding these returns to individuals, personal tax returns and statements and scrutiny.

Uh, now, again, these kind of returns in the past have been, uh, liable to tax by authorities. But it's been very hard to collect that tax, uh, essentially because a lack of data, uh, transparency or data availability. Uh, so I guess the question to Steven is going to be how are they? How have they increased that transparency and their ability to enforce that? Well, okay, let's put that question to you from Stephen to Stephen.

Mhm. Yeah. So uh the situation is very complex. Let's put it this way. I think it's one of the most to put things into perspective. Right. This is by far the hardest climb down that I've seen in there at least in a decade. Okay. Last time we had something like this was back in 2015, 2016 on the UnionPay swiping card. Steve, probably remember about that. Um, so that's actually on the actual money movement side, right?

So to put things into perspective, as of now, roughly speaking, you can say mainland customers account for about, say, between 30 to 50%, give or take. Right? In terms of the total new business in Hong Kong for life insurance companies. And this range is very, very wide. You know, some insurance companies, like I say, Prudential is higher on the scale. Maybe 50% of that business is from mainland. Right. And then a little bit less for the others.

Probably a little bit lower. Right. But um, we get random numbers. So for example. Right. If you shave, let's say every 10% off that what they call MCV mainland Chinese visitors segment. Right. The impact on the whole company ranges between 2 to 3%. Right. That's for this year. Now, of course, the question is, you know, can this apply to existing policies? Is it just affecting new policies? Will customers, because of higher friction costs, will surrender the policy and buy stuff in mainland?

Right. So we can get to those. But in effect it is it is significant. I don't want to I don't want to water this down too much. Let's put it this way. Right. We need to be extremely cautious about this. But my personal opinion to that is. Buying an insurance policy is not a tax evasion, to my knowledge. The purpose is not to evade tax. If the argument of putting the tax on offshore insurance policies, then what about the onshore policies?

That would be the first question I ask myself right at the moment. Insurance policies, returns or the payout are not tax that that's where we at right now. So we can debate whole day why China is doing this right. But clearly, you know, we need to look at the facts right. What what can they actually do and what is actually going to impact. Right, right. Yeah. That is our question that we're trying to figure out because again, they're trying to plug many different loopholes and many different ways.

I mean, you're saying it's not tax evasion, but clearly the Chinese authorities want to bridge this yawning budget deficit. They also want to stem what they see to be excessive or illicit cross-border flows. We've seen a number of different steps. We've seen the crackdown on the on the brokerages. We've seen sort of an attempt to crack down on trust structures that have been popular with the ultra wealthy. I've had lunch with a senior banker here in Hong Kong who brought me the lunch to ask me what's going on.

How do we deal with this? Because they're trying to figure this out. An