High net worth investors in Asia have grown a lot more sophisticated. Where once many wealthy Asian private banking clients failed to see beyond their own backyard, they now look to spread their assets across continents.
Private bankers agree this evolution was sparked off by the financial crisis of 1997, which highlighted the importance of creating a well-diversified investment portfolio.
Mok Yuen Peng, head of investment advisory at HSBC Private Bank, has observed the industry changes from the front lines. Ms Mok was hired by HSBC in early 1997 to start a private banking investment advisory team in Singapore, where she dealt with clients from all over Southeast Asia.
'At that time, clients were not so familiar with the concept of diversification, so it tended to be that Malaysian clients, say, would only buy Malaysian shares, and Indonesian clients would only buy Indonesian shares and government-issued bonds. When the Asian crisis struck in late 1997, these clients 'dollarised' their assets and started to ask what they could buy with the US dollars they were holding.'
It was then, Ms Mok said, that many high net worth investors in Southeast Asia woke up to the fact that their 'investable' universe was global and that diversifying their portfolios could give them enhanced returns at lower risk.
'In a way, we began educating clients through relationship managers to the benefits of diversification. They started investing in 'triple A' and emerging market bonds. Some started buying Korean bank bonds that were paying 17 per cent to 18 per cent [the sovereign rating on South Korea being very high then]. And over time as the corporate bond spread tightened and United States treasury yields came down, they actually made capital gains on such bonds too.
'This made them think bonds weren't such a boring asset class after all. From there, they started to look at structured products and currency diversification.'