Return of Asian 'moneybags'

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(China Daily/Agencies)
Updated: 2009-10-23 08:42

Asia's rich are again favoring the leveraged investments that backfired on them during last year's market turmoil, according to the head of DBS Group Holdings Ltd's wealth management unit.

"Investors have short memories," Amy Yip, who oversaw Hong Kong's $245 billion foreign-reserves fund before joining Southeast Asia's biggest bank in 2006, said in an interview in Hong Kong. "Many of the Asian clients are back in the very aggressive leveraged posture that they had adopted in the fall of 2008."

Rich investors in Asia are borrowing more to fuel returns, spurred by record-low interest rates and a stock market recovery. That approach cost them last year, when their assets fell more than the global average.

"It does prove the case that Asian investors love to take a punt," said Roman Scott, managing director of Singapore-based Calamander Group Ptd, an investment firm that compiles surveys of private banks. "The gambling instinct and propensity to play around with structured products will mean they still have a taste for these things."

Millionaires in the Asia-Pacific region saw their total wealth decline 22.3 percent to $7.4 trillion in 2008, compared with the global average drop of 19.5 percent, according to a report published this month by Cap Gemini SA and Merrill Lynch Wealth Management.

Pre-Lehman levels

Yip, 57, worked at the Hong Kong Exchange Fund between 1996 and 2006. During that time, the fund's assets more than doubled to HK$1.2 trillion. The fund, set up in 1993 and run by the city's central bank, had HK$1.9 trillion of assets on Aug 31.

Chris Meares, chief executive officer of HSBC Holdings Plc's private bank, on Oct 5 said risk appetite among investors is increasing. DBS investment managers are advising clients to adopt a "less aggressive stance", Yip said.

"There's no right or wrong," said Yip. "It's the clients' decisions, as long as they know what they are doing."

The MSCI Asia-Pacific Index, which plunged 43 percent in 2008, has climbed 34 percent this year and is headed for its best annual performance since 2003. The gauge has recovered to where it was before the September 2008 collapse of Lehman Brothers Holdings Inc sparked a global financial panic.

While Asian millionaires were burned by last year's market rout, their wealth will grow faster than the global average over the coming decade, according to Cap Gemini and Merrill. The region is home to the world's quickest-growing major economies, China and India.

The wealth of China's millionaires overtook their peers in the UK to rank fourth last year, the two firms said.

"These guys are businessmen, they are the new money and they're still making it," said Scott. "They are entrepreneurs and have entrepreneurial instincts. It works for building factories in China, but it might not work so well for building up their wealth in the long term."

Wealthy clients

DBS's private bank, whose assets under management jumped 25 percent in the third quarter to S$30 billion ($22 billion), faces mounting competition for wealthy clients from rivals ranging from Singapore's Oversea-Chinese Banking Corp to Julius Baer Group Ltd of Zurich.

Oversea-Chinese catapulted past DBS last week in terms of assets managed for rich people after agreeing to pay $1.46 billion for ING Groep NV's Asian private banking assets. The purchase more than tripled its private banking assets to $23 billion. DBS, which dropped out of bidding for the business earlier, will focus on growing without acquisitions, Yip said.

"If you cannot manage to grow your own business, what makes us think that we can buy something else and grow it?" said Yip, who is also chief executive of the bank's Hong Kong unit. "You've got to be able to do your own business well before you can acquire and grow as well."

DBS will expand its private bank in China by adding branches in the Pearl River Delta area adjacent to Hong Kong, and plans to set up operations in growing markets like Indonesia and Taiwan, Yip said. The company already has outlets in Shanghai, Beijing and Macao.

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