In the decade and a half since establishing its Hong Kong base, the Chinese asset management sector has gone from being a marginal player to a leading force in the city's capital markets. Ding Chen, CEO of Southern East Capital and an independent non-executive director at Hong Kong Exchanges and Clearing, embodies this journey. From launching the first RQFII products to becoming the city's largest ETF issuer, he is a seasoned veteran of the industry. In this exclusive interview, Ding Chen discusses the evolution of the market, the unique strengths of Chinese firms, and the trajectory for future expansion as Asia's economic weight grows.

A Decade of Firsts in Hong Kong

Ding Chen has been a fixture in Hong Kong's financial landscape since moving from the mainland 16 years ago, witnessing its transformation from an international hub into the nation's vital window for financial opening. He notes that the early days for firms like his were tough; when Southern East Capital was registered in 2008, the market was dominated by foreign banks and the global financial crisis was unfolding. It launched three major initiatives – no product, no brand, and no market. The turning point arrived with the RQFII scheme in 2012, which allowed the firm to be among the first to issue ETF products to international investors, providing a compliant on-ramp for global institutions to allocate to Chinese equities. The flagship product, the Southern FTSE China A50 ETF, was described by Bloomberg as a barometer for foreign investment, reaching a peak scale of HKD 50 billion.

Since then, the firm's momentum has built. It took 15 years to reach HKD 100 billion in assets under management, but only three more to add another HKD 100 billion, bringing the total to HKD 200 billion. Ding Chen attributes this acceleration to three key factors: a supportive market environment, a strategic replication of the Connect framework, and the ascendance of Asian technology firms. The openness of Hong Kong's capital markets, alongside innovations like allowing leveraged and inverse products in 2016, created new opportunities. Meanwhile, as some foreign institutions retrenched, local and mainland-domiciled firms found space to grow. He highlights a successful venture: partnering with Saudi Arabia's sovereign wealth fund PIF in 2023 to launch a Saudi-focused ETF that later listed on the mainland via the ETF cross-listing model, and in 2024, a reciprocal listing on the Saudi Tadawul exchange that became the largest ETF in the Middle East. Alongside these, the rise of hard-tech, high-end manufacturing, and AI-linked sectors across China and Asia provided fertile ground for new product development.

Connecting Global Capital with Asian Product

Ding Chen believes that Chinese asset managers in Hong Kong have a unique "talented" disposition for acting as two-way connectors. They combine mainland market context with an international outlook, offering a natural ability to export Chinese asset value globally. The firm's product development follows a "front-end research" model, assessing global macroeconomic and political trends before identifying sectors with long-term growth cycles. They then structure investment products that are both compliant and practical, considering market rules, trading habits, and monetary conditions of different jurisdictions. This dual mandate – promoting Chinese assets and seeking high-quality opportunities in Asia and the Middle East – is central to their strategy.

Execution Speed as Competitive Edge

A smaller team of around 100 people, known for its agility, is a core differentiator for Southern East Capital. Ding Chen points to a distinct operational philosophy relying on strong internal cohesion and external integration. The firm’s flat structure allows for complete information sharing and rapid, unified decision-making when a new trend emerges. He boasts that market counterparts are often surprised by their speed, a crucial advantage in the competitive world of product launches. An illustrative example was the Saudi ETF project. Through proactive engagement with PIF, the firm met its strict three-tier due diligence process and successfully launched the product in six months – a record for the sovereign fund's partnerships.

Beyond the Core: The Nuances of Leveraged Products

With ten of its products now included in the ETF Connect scheme, the highest of any issuer, Ding Chen notes that demand remains diverse and not fully met. Investors in mainland China currently favor innovation-themed products, such as AI, high-end manufacturing, and Korea-focused ETFs, with one recent listing attracting over HKD 1.4 billion in assets quickly. He confirms that leveraged and inverse products are unlikely to be included in the Connect scheme in the near term. The decision rests with mainland and Hong Kong regulators, who prioritize investor protection. These instruments, which exhibit high volatility and path dependency, are designed for short-term trading, not strategic allocation, and many investors may not comprehend their risk-return profiles. He underscores a key distinction: leveraged/inverse products rebalance daily, which means their long-term returns can deviate significantly from the underlying index. They are tactical hedging or income-boosting tools, not vehicles for long-term holders, and are not suitable for the investor protection framework underpinning the Connect program.

Embracing Innovation, Not Just Hot Topics

When assessing new products, Ding Chen's guiding principle is a simple one: Does the sector have long-term development potential and genuine market demand? He avoids riding short-term trends. For example, the firm's launch of a physical gold ETF was a strategic response to global diversification needs amid geopolitical risk, aligning with Hong Kong's drive to become a leading financial center beyond equities and IPOs. He is open to emerging asset classes, attributing this to a mindset of "active acceptance and active learning." Each era brings its own products and value. The current rapid development of AI is an unavoidable trend that will reshape industry, and asset managers must be willing to understand these shifts to capture enduring opportunities.

Ambitions for the Future

Having recently achieved its target of becoming Hong Kong's largest ETF issuer, Southern East Capital is not resting on its laurels. Ding Chen’s ambition now is to be a leading asset manager in Asia. Hong Kong, with its base of just 7 million people, offers a small domestic market, but it functions as a crucial gateway. He aims to bring Asian investment opportunities to Hong Kong and attract investors from the region to the city's capital markets. His confidence is grounded in a powerful statistic: Asia accounts for nearly half of global GDP and over 60% of annual economic growth. This expansion will inevitably lead to wealth accumulation and a surge in demand for asset allocation and wealth management services. Hong Kong, with its international profile, simple tax regime, and free capital movement, is ideally positioned to cater to this demand. The firm's strategic pivot is to leverage this "super-connector" role, serving global investors by presenting Asian assets on a global stage and introducing the world's best opportunities to Asia.