SYDNEY - Australian wealth managers are scrambling to take advantage of new visa rules that will compel wealthy would-be immigrants, mostly Chinese, to invest in capital-hungry small companies to qualify for residence, while continuing to bar them from direct property investment.
While some immigration experts are sceptical about the appeal of the two-year-old Significant Investor Visa (SIV) under such strict new investment requirements, many believe the tightening will not deter wealthy applicants.
More than 90 per cent are Chinese moving to Australia for a better lifestyle, although some may also be avoiding a corruption crackdown that is prompting many wealthy Chinese to move their money.
"I am hearing from my associates that Chinese will still come. I know many would be happy to sacrifice returns as long as they get the visa," said one Melbourne-based immigration lawyer who did not want to be identified.
Fund managers are awaiting final rules, which should take effect from July 1, with more than a dozen institutions, including Morgan Stanley and Macquarie, planning new products or tweaking current offerings, industry sources said.
The rule changes will extend the visa's tight controls on property investment, but now there are fears the legislative changes could overheat small-cap stocks in the same way investor demand ignited property prices, with small-cap companies expected to see billions of dollars of investment under the new rules.
The SIV requires at least 40 per cent of the A$5 million (S$5.2 million) needed to qualify to be invested in small-cap or venture capital funds.
Sydney consultancy Basis Point forecasts A$1 billion would flow into small-cap funds each year under the SIV and A$350 million would flow into venture capital funds, 31/2 times last year's A$100 million inflow, based on current visa approval rates.
"There's not really the capability to absorb what could be a few billion dollars worth of fund flows," said Goldman Sachs equity strategist Matthew Ross.
"It (heavy foreign investment) can definitely push valuations to a point where they get even more stretched."