Billionaires on the rise in Asia

The region has the world’s fastest economic growth rate, which in turn has resulted in a rise in the number of millionaires and billionaires.

A RISE IN private debt in the Asia Pacific region is a concern, but unlikely to trigger a financial crisis because the rate of increase in advanced economies is expected to be gradual, said Helman Sitohang, Credit Suisse’s chief executive officer for Asia Pacific and executive board member.

The region has the world’s fastest economic growth rate, which in turn has resulted in a rise in the number of millionaires and billionaires.

The number of billionaires in Asia Pacific is estimated at 715, compared with 565 in the United States, 535 in Europe and 228 in other regions. “In the next 5-10 years, the numbers will grow even further, widening the gap between Asia Pacific and the rest of the world,” Sitohang predicted.

The Asia Pacific wealth management market is attractive, again with the world’s highest growth rate projected at 10 per cent between 2016 and 2018, followed by the Middle East at 9 per cent, Eastern Europe 8 per cent and Latin America 7 per cent, according to Credit Suisse. As of June 30, 2017 assets under management of the Credit Suisse Asia Pacific were CHF 178 billion (Bt6 trillion).

The bank said it focuses on the ultrahigh net worth (UHNW) and entrepreneur clients across the region.

Sitohang said the bank could offer clients differentiated wealth management services as it is able to leverage its private banking and investment banking businesses to help clients preserve and increase their asset values.

Asked about risks of asset bubbles regionally and globally, Sitohang said that it might be a new paradigm of asset valuation, because the historic low interest rate, has led to investors now accepting a high P/E (price-to-earnings ratio). However there is no guarantee this would continue into the future.

Retail investors who trade securities online may be less protected and not fully understand financial product associated risks, he warned. His team tailors wealth services to clients and even observes their body language to better know an individual’s risk appetite.

Is there a threat to the banking business from disruptive technology? he was asked. Credit Suisse has successfully worked with tech companies, e-commerce and fintech firms, he replied.

“We’re actually the most active bank when it comes to, in particular, China’s technology firms listing particularly in the US. For a very famous example, we were number one among the lead banks in Alibaba’s IPO,” said Sitohang.

The bank also jointly sponsored the listing of ZhongAn Online P&C Insurance Co, China’s largest online insurer, on the Hong Kong market a few weeks ago. Asked about signs of a bubble risk in the tech sector, Sitohang said that bubbles are a consequence of rapid growth creating a herd mentality. Then there would be survivors and victims, he said, listing Alibaba, Tencent, Baidu among survivors that would continue to grow. He said he looks at the positive side of a fast-growing ecosystem because it creates opportunities.

The risk caused by the high level of private debt in the region is something to watch, he said.

The World Bank recently warned about elevated private debts, which continue to rise and increase vulnerability of the financial market. If the US were to increase interest rate rapidly, it would aggravate the vulnerability of the financial system and could spark capital outflows from the region, said the World Bank.

“As the player, of course, it is something that we’ re watching, and there are some concerns, but I don’t think a disaster is developing,”

Sitohang assured. Sitohang said he did not expect abrupt capital outflow from the region should the US Federal Reserve increase the rate in December as the market had already factored in a gradual rate hike scenario.

Even if rate hike leads to a US 10-year bond yield of up to 2.5 per cent or 2.75 per cent, investors would still be reluctant to pull money back as they could find higher yields in the region, he said.

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