People walk in Lujiazui financial district during sunset in Pudong, Shanghai, China July 13, 2021. Picture taken July 13, 2021. REUTERS/Aly Song

HONG KONG/SINGAPORE, April 29 (Reuters) – Wealth managers at major global banks are tempering their expectations for Asia, their fastest-growing market, after regulatory repression in China and the COVID-related slowdown helped push customers, bankers and analysts to the sidelines. mentioned.

Some wealth managers have reduced the credit they extend to wealthy clients, they said, while many clients have moved their money elsewhere or put it in cash as they assess changes in China, as well as the conflict in Ukraine and other global uncertainties.

The slowdown in wealth management activity was evident last week in the earnings results of Credit Suisse (CSGN.S), HSBC (HSBA.L), Standard Chartered (STAN.L) and UBS (UBSG.S) , which relied on Asia to boost revenues. Read more

“We just have to put up with this for a few quarters, there’s no hesitation,” said a Singapore-based banker with an Asia-focused private bank.

“We help clients adjust portfolios, reduce margin ratios, especially on tech holdings,” he said.

The banker and his peers declined to be named because they were not authorized by their organizations to speak to the media.

Bankers, however, pointed out that while the mood has changed in Asia at least for the next few quarters, global wealth managers still see Asia as their best growth opportunity.

“What we’re seeing is actually a similar sentiment among clients (in Asia) last quarter. Such a weak appetite to invest, a bit of a wait-and-see pattern in terms of active investing,” said the UBS CEO, Ralph Hamers, first. – call for quarterly results.

A key change in the investment calculus for China came from last year’s regulatory crackdown targeting industries such as internet platforms, real estate development and private education that have created many Chinese billionaires. Authorities aim to bridge the widening gap between rich and poor through what President Xi Jinping has called a “common prosperity” policy.

This cast deep doubts on the growth prospects of heavy players in these industries, including Tencent and Alibaba, and triggered a sell-off in their stocks.

That, in turn, has clouded the outlook for wealth management in the region, bankers said, although on Friday Beijing signaled a potential easing of the crackdown with plans for top executives to meet with tech executives at the beginning of next month. Read more

“Our clients started to realize from the second half that they would need to diversify their portfolio to protect their wealth from the policy fallout,” said a Hong Kong-based wealth manager at a US firm.

“But no one knows now which sector will generate new wealth, or see regulatory repression, and whether the total wealth pool maintains its growth as before. So, in that sense, we see expanded long-term uncertainties.”

The crackdown also likely means fewer new billionaires to serve for wealth managers, he said.

“The era in which China’s Internet industry kept pumping out wealthy customers has come to an end.”

UBS said in a report in February that the revenue pool of private banking service providers in China is expected to be in a wide range between 224 billion yuan and 1.03 trillion yuan ($34-156 billion) in 2030. , because the desire for common prosperity could bring more uncertainties to entrepreneurship. Read more

Growing uncertainty and steep market declines in recent months have also triggered margin calls on money wealth managers have lent to clients to buy stocks and other assets.

This has reduced lending by private banks, which is essential to increase their assets and retain customers.

Deteriorating economic prospects due to protracted COVID-19 outbreaks in major Chinese cities and an impending rise in interest rates around the world have also prompted some wealth managers and their clients to deleverage as they lose their appetite for trading.

“We hear from banks that customers tend to be very conservative with transactions and less inclined to commit to something more structured, and stay really lean,” said Jasper Yip, Hong Kong-based partner of the consulting firm Oliver Wyman.

Two wealth managers from major European private banks said their clients’ cash holdings, as a percentage of their total portfolio, had risen to 20-25% in Asia, from 5-10% in the same period last year .

Their banks may be forced to look for a way to cut costs if declining revenues continue in the coming quarters, they added.

($1 = 6.5883 Chinese yuan renminbi)

Reporting by Selena Li in Hong Kong and Anshuman Daga in Singapore; Additional reporting by Oliver Hirt in Zurich; Editing by Sumeet Chatterjee and Edmund Klamann

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