HK, Singapore family offices ready to exploit public market turmoil
Family offices and high-net-worth individuals (HNWIs) are ready to adapt to opportunities arising in public markets and exploit changing capital flows, according to global survey by conducted by investment manager Capital Group.
In a survey of Hong Kong investors, 48% saw good value as a reason for investing more in equities over the next 12 months, while only one-third globally agreed with that reason.
“The substantial market cap lost in China markets over the last few years have also created opportunities from a valuation perspective, attracting investors to re-enter the markets in search of undervalued investments,” Toby Chan, head of client group for Hong Kong and Greater China at Capital Group, told AsianInvestor.
Among Singapore investors surveyed, 68% expected fixed income and equities to be less risky than cash and can better counter inflation over the next 10 years. Globally, 58% agreed.
Yields on cash-like investments have decayed rapidly over the past 18 months, as the Fed concluded its rate hiking cycle, and investors are recognising they can earn higher returns by actively investing in fixed income and equities, said Jeik Sohn, head of client group for Singapore and Southeast Asia at Capital Group. The firm has been advising investors in Singapore to take cash out of the sidelines, he said.
“This is an opportune moment to pivot to equities and consider the stability and income potential offered by fixed income investments,” Sohn told AsianInvestor.
The firm commissioned the survey via the Financial Times’ research agency, Longitude, to gather the views of 450 global family offices and HNWIs.
COMING ALIVE
The time to re-enter Greater China equities might be now. While the S&P 500 struggled, Hong Kong’s Hang Seng Index saw a reversal of fortunes to finish April with a bull run. As of May 3, the Index rose 10.48% over the previous month.
Earnings in Hong Kong helped drive the rally as they showed more resilience in the Chinese economy than many expected. Chinese PMI figures added support to the rally as the readout showed a second straight month of growth, according to Lewis Grant, senior portfolio manager for global equities at investment management firm Federated Hermes.
“These factors are daring to suggest that the Chinese economy could be at the beginning of a turn around, and certainly supports the thesis that there are many stocks in China and Hong Kong that are undervalued,” Grant wrote in a market update dated May 3.
While stocks remain a favoured investment among many Hong Kong investors, an increasing sense of caution and selectivity has emerged. Market corrections that have occurred since 2022 and subsiding recession risks have led to favourable valuations and a more positive macro outlook, Chan added.
“History has shown that equities and fixed income investments have repeatedly outpaced cash at the end of each of the Fed’s rate hikes. With this Fed rate hike nearing an end, it presents an opportunity for investors to shift out of cash,” Chan said.
CASH TO SPEND
Hong Kong investors especially are showing signs that they have ready capital to take advantage of investment opportunities.
All Hong Kong investors surveyed had relatively large cash holdings, making up at least 10% of their portfolios or more. Chan said that clients in Hong Kong are well known for taking a barbell approach to their investing, with high weightings in stocks and cash.
“They are comfortable keeping a higher level of cash for liability matching and liquidity. In addition, the allure of high risk-free rates, coupled with these investors’ preference for stable income, has also led to an increase in cash hoarding in the last two years,” Chan said.