Asia's super-rich rapidly scale back US exposure on trade war
[SINGAPORE] Some of Asia's richest families are cutting exposure to US assets, saying US President Donald Trump's tariffs have made the world's largest economy much less predictable.
One family office managing assets for Chinese billionaires exited its US holdings entirely and will shift the proceeds to Asia. A senior executive at one of Europe's largest private banks said the scale of the recent sell-off from rich clients and institutions around the world is unprecedented over the past three decades and could be the beginning of a more persistent shift. A top bank executive in Asia got rid of 60 per cent of US assets from his own portfolio, saying it's safer to hold cash and gold.
About 10 family offices and advisers to the ultra-rich who oversee billions of US dollars told Bloomberg News they are reducing their exposure or freezing investments, mostly in US equities and Treasuries. They cite rapid policy shifts, uncertainty and the risk of a recession. Some of them asked not to be identified discussing private investment decisions.
'For the first time, some families are considering partial divestment from US holdings,' Henry Hau, chief executive officer of Hong Kong-based Infinity Family Office, said. 'These families weathered the dot-com bubble, the Asian financial crisis, and the 2008 global crisis while maintaining faith in US assets. Now, however, they are exploring reallocating 20-30 per cent of their US portfolios to China and Europe.'
The pullback marks a rapid change from just a few months ago, when many in Asia's business elite cheered Trump's election win, sending share prices at banks and major tech firms to record highs.
Hong Kong and mainland China, which have been dealing with the fallout of a property crisis in recent years, are among the key markets benefiting from the US pullout, as well as Europe. Hong Kong's benchmark index, on which many key Chinese firms are listed, has gained more than 13 per cent this year, while the S&P 500 is down about 3 per cent.
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'Much of the Chinese business community, like the business community elsewhere, was looking forward to Trump the deal maker, rather than Trump the anti-trade hawk,' said Clifford Ng, a managing partner of Zhong Lun Law Firm in Hong Kong who advises the super-rich. 'High-net-worth clients are retrenching and re-evaluating their global allocation of capital.'
Carman Chan, founder at Click Ventures, a Hong Kong and Singapore-based firm that manages her family's assets, said investors – including herself – are taking profits from the US market. They are allocating more to Asia, primarily China and Hong Kong, where valuations are more attractive.
Hau, whose multi-family office serves mainland tycoons, said his firm has hedged against most holdings and will accelerate selling during any market rebounds.
The moves by private individuals echo a broader emerging shift away from the world's largest financial market as the Trump administration's policies undermine its appeal. Janus Henderson Investors sees a potential reduction in its US exposure. Amundi said clients are pulling away from the US and investing in European funds.
The US has long been the world's most popular destination for the rich to invest. Its stock markets are the largest and most vibrant, drawing firms from all over the world to list there, including from China and Hong Kong. Japan and China are also top holders of US Treasuries.
For many of the affluent in Asia, the world's largest economy has also been a favoured choice to send their children to college.
To be sure, it's not clear how broad the pullback will be or how long it will last. US assets form a significant part of many portfolios. While headlines have fuelled a swift reaction from some rich investors, other family offices said they will remain on the sidelines rather than actively sell.
The US is still a haven that's hard to replace, three family offices executives said. US stocks also remain attractive from a long-term perspective, one of them said.
Two other advisers to China's ultra-high-net-worth said their clients continue to have reservations about increasing exposure to the mainland after a years-long crackdown on entrepreneurs, and are waiting to see more evidence of policy support from President Xi Jinping.
Upcoming trade talks between the US and China are already spurring optimism that tensions between the world's two largest economies may ease. And Trump could dial back tariffs as quickly as he started them.
'The greatest concern is the rule of law,' said Zhong Lun Law Firm's Ng. 'Will treaties and trade deals and ownership rights be respected? If not, investors have little choice but to pull back.' BLOOMBERG
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