Asian millionaires favour stocks, cash over property, study finds

World Wealth Report 2017 finds the region’s richest investors raising their cash and equities holdings

PUBLISHED : Friday, 29 September, 2017, 5:06pm
UPDATED : Friday, 29 September, 2017, 10:06pm

People with investible assets of at least US$1 million, the threshold for defining so-called high net worth individuals (HNWIs), are choosing equities and cash over real estate and fixed income investments, according to a recent report.

The region with the highest population of HNWIs, Asia-Pacific, has seen the amount invested in shares by this group rise by 4.4 per cent since the first quarter of 2016, while their assets held in cash climbed 4.3 per cent, according to the World Wealth Report 2017 conducted by consultancy Capegemini.

The survey found 40.4 per cent of the region’s richest residents – apart from those in Japan – said stocks were the biggest driver of their investment performance in 2017. The number was much higher globally, with 90 per cent of this bracket citing equities as an important, or the most important, contributor to their investment returns, the report said.

Whether intentionally or not, the preference for stocks falls in line with the advice of the American billionaire Warren Buffett, arguably the most successful investor on the planet. Buffett has amassed more than US$73 billion, according to Forbes, mostly by making sage investment moves. One of his favourite tactics is the buy-and-hold strategy.

“The money is made in investments by investing,” the 87-year-old said in a 2016 interview with CNBC. “By owning good companies for long periods of time. If they buy good companies, buy them over time, they’re going to do fine 10, 20, 30 years from now.”

Hong Kong’s wealthy investors have also taken a leaf out of Buffett’s book, with 58 per cent of HNWIs citing equities as the most important driver of their returns. This has partly mirrored the performance of the city’s stock market, which saw its daily turnover jump by 28 per cent to HK$60 billion in the first quarter of this year, from HK$47 billion in the last three months of 2016, according to KPMG.

Over all, the richest investors in Asia-Pacific put 28 per cent of their assets in equities in 2017, followed by cash and cash equivalents (24.9 per cent).

We believe a globally diversified allocation with an Asia focus is the best way to mitigate risks
Adrian Zuercher, UBS Wealth Management

Despite the buying frenzy in property continuing in most of the region’s cities, the more affluent members of the population have reduced their investments in real estate to 18.7 per cent from 24.6 per cent in 2013, while increasing their holdings in equities, cash and cash equivalents.

This seemingly strong faith in equities has, however, dented the growth in the number of HNWIs in Asia-Pacific in 2017, the report says, because of sharp declines in stock markets in China and Japan. Both had played a part in swelling the ranks of the region’s wealthiest group in the past.

Globally, alternative assets accounted for a much smaller proportion of wealthy investors’ portfolios, ranging from 9.9 per cent to 11.9 per cent.

Not all experts agree with Warren Buffett’s strategy.

“We believe a globally diversified allocation with an Asia focus is the best way to mitigate risks without compromising potential returns,” said Adrian Zuercher, head of asset allocation for Asia-Pacific at UBS Wealth Management.

“A multi-asset class Asia-focused allocation, in our view, can deliver solid returns while steering clear of common investment dangers due to the effects of diversification.”

Perhaps unsurprisingly, the study found the world’s richest are getting richer. The total value of the assets held by this group of 16.5 million people is expected to reach US$100 trillion by 2025.