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China’s HNWI urged to diversify offshore

Chinese high net worth investors need to allocate assets overseas to hedge country and currency risks, experts said in a forum held in Shanghai.

“The first reason [to have overseas allocation] is to hedge country risks. After all, China is not an open capital or open financial market. The economy is also in an L-shaped growth pattern, meaning HNWIs should allocate part of the assets into regions with recovery or stronger growth,” said Celene Loo Peck-hwee, chief investment officer of SITCOAM (Hong Kong) Holdings, a subsidiary under Shanghai International Trust, at 2016 China Asset Management Annual Summit held in Shanghai last Saturday.

“The second reason is to hedge currency risks, which were experienced last year.

“The third is individual reasons. Some people have children studying abroad and have expenditure in overseas currencies. Hence they need some income to hedge the currency.

Boston Consulting Group said onshore investors only allocated 4.8% of assets into overseas markets last year.

Loo added that Singapore’s HNWIs already have 38% of assets overseas, while those in other countries exceed 50%.

Henry Mo, managing director and chief economist at AIG, said that he prefers the US residential market among overseas investments.

“The US has a relatively good economic recovery amid global uncertainties, so I expect the US dollar would still have a slight appreciation, thus US assets are still in favour.

“The residential market in the US has more potential than the commercial side, which is very expensive. The former is basically having demand surpassing the supply, and I believe housing prices will grow an average 4-5% annually in the coming few years.”

Loo said one has to save some cash and have some high yield bonds, and Hong Kong equities.

“Some offshore bonds issued by Chinese conglomerates give roughly 5-6% of yield, which is quite decent amid the low interest rate environment.”

Hong Kong equities offer attractive yield, she added, “but no one is buying. People are rushing to buy [safer] treasury bonds. The market is now in panic and very irrational.”

Part of the Mark Allen Group.