Stock Groups

Odds shift for global banks’ Asia wealth bets in China’s slower-growth reality -Breaking

[ad_1]

© Reuters. FILE PHOTO – People stroll in Lujiazui’s financial district at sunset, Pudong (China), July 13, 2021. Photo taken on July 13, 2021. REUTERS/Aly Song

Selena Li, Anshuman Daaga

HONG KONG/SINGAPORE, (Reuters) – Wealth managers in the major global banks have begun to temper their expectations of Asia as their fastest-growing market. Clients were left behind by China’s regulator crackdown and slowdown due to COVID, analysts and bankers said.

They claimed that some wealth managers reduced the amount of credit they extended to wealthy clients. Many clients moved their money away or paid cash, and they are now assessing the changing circumstances in China, the Ukraine conflict, and other global uncertainty.

This week’s earnings results showed a slowdown in the wealth business. Credit Suisse (SIX-), HSBC (OTC:), and UBS have all relied on Asia as a source of their revenues.

One Singapore-based banker said that “we just have to carry this for a couple of quarters,” and added, “There’s no hiding from it.”

He said, “We help clients to adjust their portfolios and cut margin ratios, particularly on tech holdings.”

Because they weren’t authorized by their organizations to talk to the media, both the banker and his peer declined to be identified.

However, Bankers stressed that, while Asia’s mood may have changed over the coming quarters, global wealth managers continue to see Asia as their greatest growth opportunity.

We see a similar sentiment among clients in Asia from the last quarter. UBS CEO Ralph Hamers stated that there was a muted appetite for investing and that active investment is a waiting-and-see approach.

China’s last year’s regulation crackdown, targeting the private education and internet platform industries that are responsible for many Chinese billionaires, has led to a significant shift in China’s investment mindset. Through what President Xi Jinping calls a “common prosperity”, authorities aim to close the growing gap between rich, poor and middle class.

CHINA SHIFT

These factors cast serious doubts on the future growth prospects of heavyweight players within these industries, such as Tencent. Alibaba (NYSE:), which triggered a major sell-off in the stocks.

Bankers say this has clouded wealth management prospects for the region. However, Beijing indicated a possible easing in the clampdown on Friday with plans to host top tech leaders early next month.

According to a wealth manager at an American firm based in Hong Kong, the client realized that diversifying their portfolio was necessary to safeguard their assets against any fallout from the policy.

No one is certain now which sector will produce the new wealthy, sees a regulation crackdown or if the overall wealth pool continues to grow as it was before. We see an increase in long-term uncertainties.

According to him, the crackdown will likely result in less wealth managers serving new billionaires.

The era when China’s Internet industry was able to continue pumping money into high-net worth clients is over.

UBS stated in a February report that China’s revenue pool for private bank service providers is expected to be between 224 billion and 1 trillion yuan. This range amounts to $34-156 billion in 2030. The common prosperity drive might bring about more uncertainty in entrepreneurship.

In recent months, market volatility and rising uncertainty have prompted margin calls to money wealth managers borrowed to clients for stock and other investments.

The private banking sector has been less likely to lend, which can be a key factor in increasing their assets as well as locking in customers.

A worsening economy due to long-term COVID-19 infections in China’s large cities, and an upcoming rise in global interest rates have also prompted some wealth managers to deleverage as their clients lose the desire to trade.

Jasper Yip from consultancy Oliver Wyman in Hong Kong, stated that banks clients have a tendency to be conservative when it comes to trades, less inclined to make more complex commitments, and they keep their hands pretty light.”

Two European bank wealth managers stated that the cash of their clients has risen from 5%-10% to 20%-25% last year, to 20%-25% now.

They said that their banks might be required to find a way of cutting costs in case revenue falls further.

($1 = 6.5883 renminbi)

[ad_2]