Private banks eye cash-rich investors in emerging Asia

REPORT FROM BUSINESSWORLD PRIVATE BANKS are looking at emerging Asian markets as their next frontier for growth as investors swamped with excess liquidity opt to tap banks’ services and seek access to more sophisticated offshore investment instruments. Governments should thus ease rules on offshore investments since markets awash with substantial amount of foreign exchange reserves are continually under pressure to remove capital controls, said Renato de Guzman, ING Asia Private Bank Ltd. Co. chief executive officer (CEO). "Too much liquidity trapped internally creates bubbles in the market. What is necessary is for emerging markets to open up and invest internationally, especially if there’s a limited amount of investment outlet locally," he told BusinessWorld on the sidelines of an international conference attended by CEOs on Wednesday. "It’s not good for such markets to keep their money internally. It’s also important for them to invest abroad," he added. The line between offshore and onshore investing would blur should Asian governments ease their policies on offshore investments, Mr. de Guzman said. In his presentation at the sixth Management Association of the Philippines International CEO Conference, the banker cited the drive of first and second generation investors in Asia who are bent on creating more wealth. This is in contrast with European investors who aim for capital preservation since their investible funds are composed largely of inherited wealth. The Bangko Sentral ng Pilipinas posted a 41% increase in dollar reserves to $30.3 billion as of August from a year ago due to dollar remittances from Filipinos working overseas and income from investments abroad. Excess liquidity within the system, on the other hand, is eased by the central bank’s cash-draining special deposit account (SDA). "The Philippines is growing well. A lot of wealth is also being created so there must be good opportunities for private banking," Mr. de Guzman said. He added that local volatility and political instability makes Filipinos much more investment-savvy, making them preferred clients of private banks. "Filipinos are typically very knowledgeable and sophisticated when it comes to investments. The Philippines has a longer history of offshore private banking than a lot of countries in Asia. That has made Filipino investors more savvy in terms of investing locally and internationally," Mr. de Guzman said. He urged private banks to custom-fit their product and service portfolios as opposed to a one-size-fits-all strategy given the difference between European and Asian markets. "Banks should put together the right kind of products that will be attractive to their market to be able to achieve the risk return objectives of their investors," he said. — Gerard S. dela Peña/BusinessWorld