Hello Maurice, remember, one more time, cash is not king, it is everything, so that all is as it should be ;0)
business-times.asia1.com.sg
Published July 22, 2003
Asia's rich emerge unscathed from 2002
Their assets grow 5.3% while global wealth dives US$1.9t
By GENEVIEVE CUA
(SINGAPORE) The world's billionaires and millionaires lost US$1.9 trillion (S$3.3 trillion) in wealth in 2002, but Asia's wealthy bucked the slide with a 5.3 per cent growth in assets to US$1.39 trillion.
Where private bankers elsewhere are bracing themselves for a dry season, those catering to an Asian clientele broke out the champagne with a profit growth of 18 per cent last year, says Roman Scott, vice-president and director of the Boston Consulting Group's Singapore office.
'Asia is the best place to be a private banker right now,' he adds. Profit margins of Asian private bankers rose from 35 to 36 per cent, on a revenue growth of 15 per cent, said BCG. In developed markets, the profit margins of institutions range from 10 per cent to over 30 per cent.
BCG's latest annual wealth report, Winning in a Challenging Market, says North American millionaires were the worst hit last year, losing as much as US$2 trillion in wealth or more than 10 per cent of their financial assets.
The wealthy in Europe lost 500 billion euros (S$990 billion) or 7 per cent. The report surveyed the wealth management divisions of 82 institutions.
Since 2000, the vicious bear market has destroyed nearly US$5.3 trillion of global wealth in local currency terms, based on households with net liquid assets of at least US$1 million. If the universe is expanded to the 'affluent' with net liquid assets of at least US$250,000, the total value of lost wealth is estimated at a staggering US$6.4 trillion.
BCG says an environment of low growth, or even no growth, will persist for the wealth management industry in general. For one, more of the wealthy have moved their assets to less volatile assets which generate less revenue for bankers. Clients are now more focused on absolute returns and asset allocation, and there is an increasing distrust of financial institutions.
But in Asia, Mr Scott says the region's over-allocation into cash is turning out to be a two-pronged blessing for private bankers. The average cash allocation among the Asian wealthy is 55 per cent, up from 53 per cent in 2001.
'For the first time, Asian clients are looking at alternatives to cash' given the record-low yield on deposits, says Mr Scott.
'Private banks have so much money in cash, they can get a profit growth not by growing the number of clients or money under management. All they have to do is switch cash into more interesting stuff and they immediately make more money.'
The 'more interesting stuff' is mainly structured notes which give investors capital security as well as a participation into a risk asset class. It includes foreign currency structured deposits where clients can take a short-term bet on the movement of two currencies. On these, banks earn a spread.
In BCG's analysis, the drivers of wealth creation are broken down into three parts.
One is the valuation of market assets like stock and bond holdings. There is also the savings rate, and the impact of currency movements against the survey's base US dollar currency.
In the latter sense, the Asian wealthy are 'sitting on a foreign exchange benefit' as many Asian currencies strengthened against the US dollar last year.
In Singapore, the wealthy's total assets rose 4.7 per cent. This is due to a 2.7 per cent rise in savings and a 6.3 per cent currency gain, but the value of investments fell 4.2 per cent.
According to BCG's data, there are roughly 100,000 households in Singapore with over US$250,000 in net liquid assets. These had total wealth of US$94 billion last year, up from US$90 billion in 2001. Even the assets of 'non-wealthy' households (net liquid assets of less than US$250,000) grew from US$42 billion to US$44 billion last year.
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