Trade war, economic uncertainty are making Asian investors more cautious, says RBC Wealth Management survey

12-Sep-2019 Intellasia | South China Morning Post | 6:02 AM Print This Post

Asian investors are becoming increasingly cautious about their portfolios as concerns grow about the US-China trade war and uncertainty over the global economic outlook, according to a new survey from RBC Wealth Management.

Among investors surveyed in China, Hong Kong, Singapore and Taiwan, 80 per cent said they were “far more attentive” than they were in the past to their portfolios as a result of the current economic cycle.

More than half of Asian investors surveyed said global economic uncertainty was their biggest concern when it came to their ability to create, preserve and manage wealth, compared with 41 per cent of investors who responded in the Canada, the United Kingdom and the US.

About a third of Asian investors further cited cross-border trade and tariff issues as a concern.

“It is a challenge for investors across the globe to generate positive returns amid a global economic slowdown,” driven in part by geopolitical tensions and ongoing trade disputes, said Terence Chow, chief operating officer for RBC Wealth Management Asia. “Given Asian economies are more exposed to trade than the US, it seems consequential that Asian [high-net-worth individuals] are the most concerned about global economic uncertainty.”

The survey was conducted by The Economist Intelligence Unit on behalf of RBC Wealth Management, a unit of Royal Bank of Canada, interviewing 2,094 individuals between May and June.

The report comes as the US and China have been engaged in a trade war for more than a year, with US President Donald Trump placing tariffs on some $380 billion of Chinese goods and preparing to add additional levies on another $160 billion of Chinese-made products in December. China has responded with its own tariffs and reduced purchases of American agricultural products, including soybeans.

Trump is trying to force Beijing to change decades of trade and industrial policies. The two sides are expected to resume face-to-face discussions next month, but many analysts are not optimistic that a deal will be reached soon.

Economists are increasingly concerned about the effect the trade war is having on business sentiment and investor confidence.

On Tuesday, Fitch Ratings cut it growth forecast for China, Europe and the US, saying a sharp escalation in the trade war and significant risks the UK could leave the European Union without an exit agreement, known as a “no deal” Brexit, was “darkening the global economic outlook”.

“While the global growth slowdown witnessed over the last 12 months reflected a variety of causes including an earlier move towards more restrictive credit conditions in China, the tightening of global dollar liquidity through 2018 and significant macro challenges in some large emerging markets the primary cause of the deteriorating outlook for the next 12-18 months is trade policy,” Fitch said.

CLSA chief economist Eric Fishwick said on Monday that he expects the US to have a “shallow recession” and global trade to turn negative next year.

As the global economic outlook grows more uncertain, about 40 per cent of wealthy Asians surveyed by RBC said they were “risk-averse”. But, that does not mean they are sitting on the sidelines, according to RBC.

The same percentage of Asian respondents said they are active investors, almost double the figure in the US.

“Sentiment among many investors right now is fragile, with the question of ‘how do I protect myself?’ at the front of their minds,” Chow said. “Of course when considering risk among [high-net-worth individuals] and [ultra-high-net-worth individuals], it isn’t just risk to their portfolio assets but also to their own companies and private ventures.

“This has meant that we’ve seen some clients shift portfolio assets to high quality bonds or defensive equity strategies. The reasoning behind this being that while there might be volatility, many of these clients expect it not to be too deep nor too prolonged.”

Respondents in Hong Kong and in China were particularly concerned about the economic outlook, with 73 per cent of Hongkongers and 89 per cent of mainlanders saying they were more attentive to their portfolios because of the current cycle.

The findings come against the backdrop of 14 weeks of protests in Hong Kong that have cut into the city’s economy, with some economists expecting it to contract this year. Hong Kong’s government revised its forecast last month for gross domestic growth to between 0 and 1 per cent this year.

Among wealthy global clients with connections to Canada, the US and the UK, “their concerns aren’t necessarily manifesting into a capital flight from Hong Kong to other jurisdictions where they may already have personal or business investments,” Chow said.

“That said, in Hong Kong, investor moods could be characterised as darker than the economic reality.”


Category: FinanceAsia

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