Thai HNWI wealth to hit $400bn next year

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Thailand’s wealthy have low exposure to offshore investment products, underscoring the opportunity for foreign managers, according an SCB Julius Baer report.

Increasing household wealth, national economic development, the prosperity of private sector firms and buoyant domestic property and stock markets are driving growth of the investible assets of Thailand’s super-rich, according to the SCB Julius Baer Wealth Report Thailand.

It estimates that Thai high-net-worth individual wealth will grow at a five-year CAGR of 9.9% to to $401.2bn by 2020.

“We see vast potential for the market as compared to more mature markets in the region, as Thai HNWIs grow more sophisticated and regulations and policies are liberalised,” said Jiralawan Tangitvet, chief executive officer at SCB Julius Baer, in a press statement.

The firm surveyed 350 people with net investible wealth of $1m or more, excluding property that is their main residence.

It found that they have similar domestic allocations to liquid assets – such as stocks, bonds and funds – as the global peers, but have relatively little appetite for real estate and alternative investments.

 


HNWI asset allocation

Asset-type

Thailand HNWIs

Global HNWIs

Stocks, bonds and funds

55%*

47%

Real estate

7%

17%

Alternatives

6%

9%

*Cash (21.5%), fixed income (20.4%), stocks (19.5%), funds (15.3%)
Source: SCB Julius Baer

 

Furthermore, the preference is overwhelmingly for onshore products. “[A]wareness of offshore investment providers is relatively low, with 74% unable to name a [single] offshore provider”, said the report, despite 40% of survey respondents apparently holding at least one offshore investment, which was typically an individual bond or stock.

Yet, among mass market investors, offshore products continue to gain traction. The total net asset value of foreign investment funds sold to Thailand’s domestic investor base increased 2.3% year-to-date in Thai baht terms, according to Morningstar’s mid-April 2019 report on the Thai fund industry.

Last year, assets in foreign investment funds in Thailand soared 60% to $17bn compared to 2016, reflecting the rising Thai investor attraction to offshore funds.

Nevertheless, the HNWI is clearly an untapped market for foreign (as well as domestic) wealth managers, if they can make the effort to educate the growing class of rich professionals and entrepreneurs.

According to the report, as much as 73% of non-users of offshore investment products “indicated no familiarity with the concept of offshore investments, while 65% of these individuals indicated a lack of understanding when it came to accessing offshore investments”.

Of those Thai HNWIs who hold (or have held) offshore products, there has been a change in their motivations in recent years, with a shift from spotting a “unique opportunity” to “looking for an investment return to match their expectations”, according to the report.

It identifies three distinct client profiles from its survey: the millennial entrepreneur (up to 40 years old) focused on wealth creation; the mature investor (41-60 years old), keen on a balance between wealth creation and preservation; and the techie retiree (older than 60 years) who wants to preserve their wealth. The least savvy about the financial services is the millennial and the most sophisticated is the retiree, according to the report.

SCB Julius Bear, a joint-venture set up last year between the Siam Commercial Bank and Switzerland-based Julius Bear, believes that “changing customer behaviour towards investment, low penetration of investment products (especially offshore) and tax and regulatory changes underpin the opportunities to tap the Thai wealth market”.

Other foreign private banks have also taken the bait. In February, LGT, owned by the Princely House of Liechtenstein, launched a wealth management business in Thailand, following in the steps of Credit Suisse, which set up a Bangkok entity in 2016, and Lombard Odier, which formed a partnership with Kasikornbank five years ago.

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