Selena Li and Anshuman Gag

HONG KONG/SINGAPORE, (Reuters) – Wealth managers of the major global banks have begun to temper their expectations about Asia. Clients were left behind by China’s regulator crackdown and slowdown due to COVID. Analysts and bankers said that this was a result of the weather.

According to some wealth managers, credit has been reduced for wealthy clients. However, many of their clients have transferred money or placed it in cash while they evaluate the risks and opportunities in China as well as other international uncertainties.

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

A Singaporean banker working for an Asia-focused bank said, “We have to bear it for a few months.

He stated that he was helping clients with portfolio adjustments and reducing margins on holdings of tech companies.

Both the banker, and his colleagues declined to name themselves because they weren’t allowed by their companies to address the media.

The Bankers pointed out that although the climate in Asia has improved over the past few quarters and the outlook for Asia is improving, wealth managers around the world still see Asia as a great growth area.

From last quarter, we are seeing a very similar sentiment from clients (in Asia). 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 and poor.

CHINA SHIFT

This cast doubts on the prospects of growth for these heavyweight players, Tencent included. Alibaba (NYSE:) and caused a huge sell-off of their stock.

This, according to bankers, has obscured wealth management prospects across the region. But, on Friday Beijing suggested a possibility of an easing of the clampdown, with plans for high-ranking leaders to meet technology executives in early January.

A wealth manager based in Hong Kong and working for a U.S. company said, “Our clients began to realize since the second-half that they would have to diversify their portfolios to protect their wealth from the fallout of this policy.”

No one is certain now which sector will produce the new wealthy, see regulatory crackdowns, or if total wealth pool growth continues 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 in which China’s internet industry continued pumping high net-worth clients to it has ended.”

UBS reported in February that China’s private banks service providers are expected to generate revenue in the range of 224 billion and 1.03 trillion Yuan yuan (34-156 Billion). This is because the common prosperity drive may bring greater uncertainty for entrepreneurship.

In recent months, market volatility and rising uncertainty have prompted margin calls to money wealth managers loaned clients to purchase stocks and other assets.

Private banks have been able to reduce lending, which has led to a decrease in their ability lend. This is important for increasing assets and locking down clients.

Some wealth managers have started to discourage their clients from trading due to the worsening economic outlook and prolonged COVID-19 epidemics in China’s major cities.

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)