03/01/25

ASIA: Family offices to favour Taiwan, India and US in 2025; may increase China exposure

As published on: scmp.com, Friday 3 January, 2025.

Taiwan, India and the US will be favoured by high-net-worth individuals and family offices in 2025 and they might also invest more in mainland China and Hong Kong due to stimulus measures from Beijing, bankers say.
“China is at a policy turning point, brought on by the roll-out of a broad stimulus package spanning monetary, property, debt and capital-market measures,” said Koh Liang Heong, UBS’s head of global family and institutional wealth for the Asia-Pacific region.

“Our clients see the relatively low valuations and are also hopeful that the Chinese market will be able to gain strength in 2025.”

Koh said UBS customers became more interested in China and Hong Kong in the fourth quarter after Beijing announced a slate of stimulus measures to support the economy and property market.
The improved sentiment, Koh said, is also attributable to the global cycle of interest rate cuts that was kicked off by the US Federal Reserve in September. Analysts expect more rate cuts to come in 2025.

But markets still face uncertainties as president-elect Donald Trump seems poised to raise tariffs on Chinese exports to the US.

“As the US tariff plan remains unclear, Beijing is likely to finalise its stimulus measures by next March’s National People’s Congress, possibly setting a higher deficit ratio of about 4 per cent in 2025,” Koh said. “This could involve increased government bond issuance and monetary easing.”

Koh said UBS’s high-net-worth-clients also have their eyes on Taiwan and India.

“Taiwan is the most attractive market due to the artificial intelligence demand impacting its semiconductor industry,” Koh said.

“India is also attractive. In the event of a global trade war, India should fare relatively well given its domestically driven economy and strong political ties with the US, which could help stabilise trade tensions.”

According to the UBS Global Family Office Report 2024, Asia-Pacific family offices plan to increase their exposure to fixed income and equities from developed markets, as well as private equity and hedge funds over the next five years, Koh said.

“Families are increasingly diversifying their portfolios regionally, particularly across Asia-Pacific, not just Greater China,” he said. “Such diversification across regions and segments can enhance income.”

JPMorgan Private Bank also believes family offices will seek global diversification and may increase their exposure to alternative investments.

“Given that many global public markets appear fully valued, family offices are likely to turn to private markets, such as private credit, infrastructure and traditional private equity buyout strategies for yield and capital returns,” said Alex Wolf, managing director and head of Asia investment strategy at JPMorgan Private Bank.

US tariffs are a key challenge for Chinese markets, he said.

“A rapid increase in tariffs to 60 per cent could significantly affect China’s growth, potentially reducing it by 1 to 2 [percentage points],” he said, adding that China could reroute exports through other markets or introduce measures to boost domestic consumption to offset the impact.

“We do think the policy shift is meaningful as it signals a recognition of the economic slowdown and willingness to address it,” he said.

US rate cuts will cause high-net-worth customers to shift from cash to higher yielding assets and they may begin to borrow, Wolf added.

Raymond Cheng, the North Asia chief investment officer for wealth solutions at Standard Chartered, has a positive outlook on US stocks and fixed income in 2025.

“We believe for the initial few months of the new year, we will [see] a spike in volatility in the capital markets,” Cheng said. “The magnitude will depend on how the new US President Donald Trump [plays his cards], including how much of a tariff he will impose on Chinese imports in particular.”

“We believe Trump is going to [have] a lot of growth-oriented strategies. We recommend an overweight [allocation] on US stocks and also US high-yield corporate bonds.”

Standard Chartered believes tariffs will be imposed in phases, and they will be used as a negotiating tactic for the incoming administration to get economic benefits for the US, he said.

“If the tariff is in line with our expectations, we anticipate the Hang Seng Index to trade at a range of 20,000 to 22,500,” Cheng said. “If Trump is more aggressive in deploying the tariff, we expect the benchmark index to weaken to 18,000 to 20,000.”

Kenny Wen, the head of investment strategy at Hong Kong-based brokerage firm KGI Asia, said volatility is on the cards for 2025.

“Investors should diversify their portfolios and buy the dip for equity funds, short-term bonds and gold,” he said. “The gold price is underpinned by a long-term uptrend due to economic downturns and rising political uncertainty.”

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