Equities are back in vogue,
particularly if they are international equities outside of the Asian
investors’ home market.
Fuelled by a bull run in stock markets and unprecedented wealth
creation, Asian High Net-Worth Individuals (HNWI) have seen strong
growth in wealth over the past five years, having captured
unprecedented opportunities from favourable economic conditions.
East & Partners Asian Wealth Management research program interviews
1,000 High Net-Worth Individuals from 10 markets – ex-Japan - on their
current and forecast asset allocation.
The third instalment of the research program, developed to track
investment behaviour and intentions of the HNWI segment in Asia, shows
that over the last 12 months their investable wealth – outside of the
family home – has increased 18 percent to a mean of US$4.98 million.
The forecast suggests it will increase another 15 percent in the next
12 months to go above US$5 million.
The research into investable asset allocation showed that the overall
proportion of assets allocated to equities has been rising, from a
total allocation of 42 percent a year ago to 44 percent today.
In terms of equities, the data reveals that non-domestic are in favour
over domestic equities, with allocation into this asset class rising
from 18 percent to 22 percent in just under 12 months, a 20 percent
Non-domestic allocation has
surpassed the predicted allocation of 21 percent, and is expected
further increase to 25 percent of total investable wealth, 5 percent
more than allocation for domestic equities.
This suggests that Asian HNWIs are increasingly looking to invest beyond their domestic
markets; seeking out differentiated products that have higher
potential yields and stability.
The results show that allocation for domestic equities will decrease
and plateau at around 20 percent in the coming year, while investment
properties look likely to stabilize to take a 35 percent allocation.
Notably, the growth in non-domestic equities comes off a reduction in
property and fixed income allocations.
Fixed income is typically seen as a critical component of a
diversified investment portfolio.
Yet, the report showed that allocations to fixed asset were trimmed to
10 percent in 2014. Perhaps that as the global economy continues to
recover, Asian investors are starting to have concerns that rise in
base interest rates will be detrimental to their fixed income
Going forward, fierce competition for allocated wealth will be
expected among conventional asset types. Investors are expected to
move up the risk curve in 2014 as they seek out yield, looking for
value in niche areas instead of the mainstream.
Currently, private banking penetration in these HNW assets is
estimated at around 15 to 25 percent – suggesting significant room for
growth in Asia.
With more people in Asia moving into the HNW category,
the Private banking Industry is well placed to service this growing