Investors spreading their assets to reduce risk: HSBC

Investors are increasingly spreading their assets across various markets to reduce risk from global uncertainties, which presents more opportunities for banks to capture wealth flows, said two senior bankers from HSBC.

The next generation of business leaders are also thinking about what a sustainable future means for their firms, which has led to geographical diversification of not just their companies’ operations but also their personal wealth.

Mr Tommy Leung, HSBC’s head of global private banking for South Asia, encompassing South-east Asia and India, said patriarchs or matriarchs in wealthy families often kept to their core markets. “But now, the next gen is quite happy to look outside their core market.”

HSBC can play a role by helping these clients look for target firms in renewable energy sectors, in places like Australia and China, he said.

Investors are also choosing to have “more pockets of wealth everywhere” rather than simply moving their wealth from one destination to another, he said.

“Historically, Hong Kong and Singapore have been the two most popular booking centres but, now, more and more clients are interested in Switzerland, in the UK, or even farther,” he added.

“We are also seeing more North American, European and Middle East clients looking to place their assets in Hong Kong and Singapore to tap the opportunities in Asia. So we have seen diversification go both ways.”

Separately, a McKinsey article on Sept 6 noted that wealth flowing into Hong Kong and Singapore is mainly coming from elsewhere in Asia, but there will likely be increased wealth flows from Europe and North America as many global investors see Asia as a safe haven for portfolio diversification.

In 2023, Hong Kong and Singapore each managed roughly US$1.3 trillion (S$1.7 trillion) in offshore assets – trailing only behind Switzerland’s US$2.5 trillion, added the management consulting firm. HSBC’s global private banking business in Asia saw US$15 billion in net new invested assets in the first half of 2024. The unit contributed nearly half of such assets globally in the lender’s wealth and personal banking business.

In Singapore, net new money inflows in the first half exceeded inflows for the whole of 2023, said HSBC, which counts the city-state and Hong Kong as its main booking centres that open accounts and serve clients.

The lender is eyeing a larger wallet share of ultra-high net worth (UHNW) individuals, whom it defines as clients with total wealth of more than US$200 million, or more than US$50 million in their total portfolio with the bank.

UHNW clients in Singapore make up 10 per cent of the overall base of such customers in HSBC’s global private banking business.

Wealth management fee income will help to drive growth at lenders like HSBC as high interest rates that have boosted earnings are cut.

Mr Leung said UHNW clients contribute a significant part of the bank’s net new money and revenue. “We are very comfortable to say that we think we can grow at a faster rate than the market, well into the double-digit percentage for this client segment, for the near future.”

Mr Lok Yim, regional head of global private banking for Asia-Pacific, said: “We’ve seen volumes increase across the board, whether that’s in the net new money or even in the net new loans, or the trading, mandates or alternatives business.”

Singapore and Hong Kong are just parts of the UHNW puzzle for HSBC, which has in recent years expanded its onshore private banking business in mainland China, where it has offices in six cities. The bank completed the acquisition of Citi’s retail wealth management portfolio there in June.

It is tapping the wealth pools of the Indian diaspora, with the launch of its onshore business in the South Asian country in 2023.

Asked about the impact of mainland China’s economic slowdown, Mr Yim said wealth is still growing steadily, albeit at a slower pace than several years ago.

More clients are sending their children overseas for further education, which presents opportunities for the bank in areas such as new account openings and payments where HSBC can leverage its international network, he added.

“That is why we have to be both onshore and offshore, and we have to be connected with the retail, investment and commercial bank,” said Mr Yim, who joined HSBC in late 2023 from Deutsche Bank.

Clients’ onshore banking needs in mainland China and India are growing faster than the offshore business, he added. “The model is not to compete with a local bank. We are targeting clients with international needs and giving them connectivity.”

HSBC’s Asia-Pacific global private banking business saw a record volume of alternative investments by clients in the second quarter, with a large portion coming from the mainland China onshore business.

Open-ended funds, in particular, have become more popular as clients want greater liquidity, said Mr Leung, who was from UBS, and also joined HSBC in 2023.

When it comes to family offices, the bank’s institutional family office service gives UHNW clients access to HSBC’s investment bankers, without clients having to go through a separate onboarding process. It has a team to guide clients who are just starting a family office.

Amid growing demand for private credit, HSBC also allows family offices to invest in certain loans that the bank makes, said Mr Leung.

“I think this is something that these ultra-high net worth clients really want – unique, exclusive assets, and to be on the same side as the bank,” he said.

Besides the super rich, HSBC is focusing on clients who are rapidly growing their wealth.

In Singapore, the global private banking business saw a double-digit year-on-year increase in clients with investable assets between US$2 million and US$10 million in the first half of 2024.

About 60 per cent of new private banking clients, who moved up from the retail segment, have significantly increased their assets under management with the bank.

HSBC joins other players who have seen increased inflows of wealth. Asia-Pacific’s biggest wealth manager UBS saw US$8.2 billion in second-quarter net new assets in the region, which was second only to Switzerland, following its acquisition of former rival Credit Suisse.

A version of this piece was first published in The Straits Times on 11 September 2024.