Asia’s pool of liquid assets is set to grow

Added 4th October 2016

Rising levels of high net worth cash should give Asia’s private banks plenty of opportunities, says wealth management research firm.

Asia’s pool of liquid assets is set to grow

Liquid assets held by Asia Pacific high net worth individuals (HNWI) are likely to grow by 7.7% annually over the five years to 2020, according to leading London-based research firm Verdict Financial.

This is good news for the Hong Kong wealth management industry.

“Growth of HNWI liquid assets [cash and equivalents] in Hong Kong is estimated to hit an annualized 7.8%, rising to $555bn in 2020 from $380bn in 2015,” said its wealth management senior analyst Bartosz Golba.

“If you look at the overall population in Hong Kong, most liquid assets are in deposits. But HNWIs show a strong preference towards equities. According to our data, 60% of the Hong Kong HNWI portfolio assets are allocated into equities,” he told Fund Selector Asia.

Although the increase in HNWI assets held in Hong Kong is not expected to be as great as in onshore China and India, the Asia Pacific market as a whole presents huge opportunities.

“In real terms – taking inflation into account – no other region will see its value of liquid assets grow at a greater pace,” said Golba.

In mainland China, HNWI liquid assets are projected to grow at about 10% annually for the five years to 2020. In India the rate of increase is even stronger, at 12.6%.

In fact, assets under management held by the private banking units of 10 key mainland banks rose an average 13.5% in the first half of this year, as reported earlier.

“But, it might be challenging to try to grab a piece in the onshore India market amid limited number of clients and fierce competition by domestic private banks,” said Golba.

 “What makes Hong Kong unusual is the local investors’ preference for near-cash products. Almost 85% of liquid onshore assets of retail investors in Hong Kong are allocated to bank deposits, while the developed markets’ average stands below 62%,” he added.

 “This protects portfolios from capital market volatility, and at the same time provides a significant cross-selling opportunity for wealth managers operating in Hong Kong.”

Last year, assets managed by Hong Kong’s private banking industry shot up 18% to HK$3.7trn ($473bn), according to a recent Securities and Futures Commission survey

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