As one commentator recently said: the complete absence of any tax treaties, makes Hong Kong a lousy place to domicile a fund."

But where it might lose out to Singapore tax-wise, Hong Kong has the one big plus of its unique situation vis-a-vis China.

Over the years the Hong Kong stockmarket has been one of the most volatile, and the mutual fund industry reflects this.

July 1 will undoubtedly bring changes and while no one is quite sure whether these will be positive or negative, Hong Kong will be China's largest stock market and financial centre for many years to come.

Hong Kong residents are renowned for their gambling instincts, but to-date the mu-tual fund route has not proved that popular - the market is predominantly the preserve of the institutions, with Joe Public preferring to buy their shares direct. Current retail penetration of the market is little more than 3%, but is growing rapidly.

A boost is also expected to arrive in the shape of the Mandatory Provident Fund, a scheme designed to encourage greater individual res-ponsibility in pension provision. The scheme, which has been approved in principle though not yet on the statute books, should cover some 3m Hong Kong employees. Fund managers, at least in the early stages, confidently ex-pect to get their hands on a fair proportion of the up to $5.8bn in new compulsory savings expected to flow into the scheme each year."