Asian banks see big boost to wealth business as currencies rally

Reuters

08-05-2025

HONG KONG/SINGAPORE, May 8 (Reuters) - A sharp rally in Asian currencies is set to boost demand for wealth and forex products as clients seek alternatives to U.S. dollar-denominated assets and demand for hedging grows amid trade tariff uncertainties, bankers and analysts say.
The rally in the currencies since last week, starting with the Taiwan dollar and spreading outwards to those of China, Hong Kong, Malaysia, Singapore and South Korea, sounds a warning for the greenback, and is seen as an "Asian crisis in reverse".
"Most of our clients are Asian, so if their own currency is growing, that gives them more purchasing power for wealth management products," Tan Su Shan, chief executive of Singapore's biggest bank DBS Group (DBSM.SI), opens new tab, said on Thursday.
A strong Singapore dollar would help bring a "pool of wealth" into the leading global wealth management hub said Leong Yung Chee, the chief financial officer of its United Overseas Bank or UOB (UOBH.SI), opens new tab.
Singapore's currency has risen more than 4% since U.S. President Donald Trump hiked tariffs on April 2.
"We hope to benefit from that in terms of the wealth management of some businesses that we do for retail clients," Leong said, during the bank's earnings briefing on Wednesday.
The expectations underscore how President Donald Trump's trade policies are pushing investors out of U.S. assets and moving their money into Asia, amid growing questions about the status of the greenback as a safe haven.
A weaker dollar is expected to cloud demand for popular U.S. fixed-income assets among wealth management clients in Asia, who may now be more open to investing in local currency denominated assets, analysts said.
The return of assets to Asia will further bolster the allure of the region as a leading global wealth hub.
Between 2025 and 2028, Asia is set to account for nearly half of all new high-net-worth individuals, or those with more than $10 million in assets, according to Knight Frank's 2025 Wealth Report issued in March.
The Asian currency swings have not yet hugely influenced investor sentiment, said Morningstar senior analyst Michael Makdad. However, over the long term, currency trends could affect flows as investments are allocated out of U.S. assets.
In Taiwan, a substantial portion of household financial assets has traditionally been allocated to life insurance products that invest heavily in dollar assets, and a leap of 8% in its currency within two days sent tremor across the sector.
"If Taiwanese life insurers struggle to generate attractive returns from U.S. fixed-income investments, it may open the door for banks to offer more alternative wealth management solutions instead," Makdad said.
Chinese exporters have accumulated a substantial amount of money in US-dollar-denominated assets, previously on the expectation of the yuan getting weaker, said Christopher Beddor, deputy China research director of Gavekal Dragonomics.
If currency expectations shift and the interest-rate gap narrows, there could be "a quite meaningful amount of money suddenly flowing into yuan-denominated Chinese bank accounts", he said.
"We're not there yet, but it's in the back of the mind for many investors."
The heightened volatility in currency markets is also expected to drive demand for regional banks' forex services, bankers said, though local clients' exports made less competitive by stronger currencies is a concern.
"They will provide both tailwind and headwinds," said DBS's Tan. "A stronger currency does affect their ability to export. It will affect their cost curves as well, and so the impact will depend on whether you're a net exporter or importer."
In Japan, banks may benefit from corporate clients looking beyond usual hedging tools to reduce foreign exchange risks.
Japanese firms have generally gone for the simplest hedging strategy - selling dollars and buying yen - but the urgency of the tariff situation is prompting them to consider other derivatives, said Noriaki Masuda, deputy manager in the transaction banking department of Mitsubishi UFJ Bank.
Company profitability will be affected when exchange rates fluctuate sharply, Masuda said, adding, "There may be cases where companies will be forced to restructure business distribution or raise prices."