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What separates downturn winners from the rest?
Financial discipline holds key to weathering market uncertainties, study suggests
The Asset 17 Mar 2023

Hong Kong people struggled to maintain healthy money habits amid the pandemic last year, resulting in a slight drop in their financial fitness, a new report finds.

Nonetheless, 59% of the surveyed respondents achieved a return of at least 2% from their liquid assets, against the local inflation rate of 1.9% and a 15.5% fall in Hang Seng Index during the period, according to HSBC’s fourth FinFit study.

Among these downturn winners, 86% are classified as moderately fit or above, indicating a potential correlation between their financial fitness and wealth return.

Hong Kong people scored 64 out of 100 in 2022, down from 65 in the previous year. This represents a downward trajectory since the study was first conducted in 2020 when their score reached 67.

The pandemic continued to take a toll on people’s living while undermining their ability to sustain healthy investment and saving habits. Only 54% of respondents had investments such as stocks, funds and bonds, down 25 percentage points from a year earlier. The proportion of respondents with a saving habit also dropped to 57% from 61% previously.

Fewer Hong Kong people, especially those with a FinFit score of under 50, practised mindful spending. Only 37% of these respondents monitored their monthly expenses, down 9 percentage points from a year earlier.

Less attention was also paid to their financial future last year. Only 64% of respondents reviewed their financial plans and 48% put in place a retirement plan, down 5 percentage points and 6 percentage points respectively from the previous year.

“No one is safe from market uncertainties, but those with good financial habits and well-diversified portfolios weather through downturns much better,” observes Maggie Ng, head of wealth and personal banking at HSBC Hong Kong.

“It is never difficult to develop financial discipline. By starting with a budget, setting your money goals and saving for the unexpected, anyone can remain resilient even in unfavorable situations,” Ng adds.

Based on the survey, financial discipline may have a bearing on investment return. Those with a FinFit score of 80 or above tend to display the following characteristics against their weaker counterparts:

  • More active in diversified investment (including exposure to alternative assets) with an average holding of 4.7 types of investment and insurance products, compared with 1.6 types among those with a score below 50.
  • About 76% would seek financial guidance from the professionals versus only 20% for the unfit, and are less reliant on social circles, such as family or friends (35% vs 70% for those who scored below 50),
  • Some 98% monitored their spending regularly, compared with 37% for those who scored below 50. 88% stayed within the budget vs 26% for their counterparts who scored below 50.

The study was conducted in January 2023, with a sample of 1,511 respondents aged between 18 and 64 years. The FinFit index adopts an algorithmic approach by combining external survey responses with internal customer data in a financial behaviour study.

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