Category: Finance

Asia’s Growth Amid Downturn in Developed World

China’s faster-than-expected reopening and consumption-led recovery have provided a notable lift to Asian economies, supporting a broad-based improvement in manufacturing and services PMIs across the region. Given that China is the single largest trading partner of 16 major economies in Asia, its demand recovery helps mitigate the drag from the global downturn for Asian exporters. New orders in Asia have already recovered to expansionary territory in January and have continued to improve in the first quarter. The pace of new export orders contraction has slowed considerably in the Asian exporting economies.

Upside surprises from China’s manufacturing and services PMI data reaffirm that the economy is on track to stage a strong cyclical recovery in 2023. We expect China will deliver a speedy growth acceleration from 2.2% y-o-y in Q1 to 7.4% in Q2, 5.5% in Q3 and 6.9% in Q4, lifting full-year GDP growth back to 5.6% in 2023 from 3.0% in 2022. We expect China can overachieve the conservative 2023 GDP growth target of “around 5%” set at the annual National People’s Congress in March.

In contrast to the growth downturn in developed economies, which is exacerbated by the tightening credit conditions caused by the banking sector turmoil in the U.S. and Europe, Asia stands out as the only region that is expected to deliver growth acceleration to 4.7% in 2023 from 3.5% last year. Alongside China’s recovery, India’s service sector boom is reflected by the surge of its services PMI to 59.4 at a 12-year high in February, adding momentum to Asia’s resilient growth in these uncertain times. The recent market turmoil triggered by Silicon Valley Bank (SVB) and related banking events have added to the market uncertainty. We believe a systemic banking crisis should be averted but the market volatility may persist. We see the Asian markets as relative safe havens in the volatile markets.

Asian Banking Sector Resilient to Contagion Risks

Against the backdrop of heightened banking sector volatility in the U.S. and Europe, the Asian banking sector has stayed resilient to withstand contagion risks. Thanks to the robust capital adequacy ratios, liquidity positions, diversified business models and the broad and stable retail deposit base, Asian banks stand out as relative safe havens amid the sector uncertainty. In Hong Kong and Singapore, the total deposits have increased significantly. Asian banks do not have mismatch in asset and liability maturity because they have been prudently regulated after the 1997-1998 Asian financial crisis.

In our view, Asian banks have built strong capital buffers to resist recent volatility in the AT1 bond market, thanks to their much higher CET1 capital ratios versus regulatory requirements. In particular, mainland Chinese banks are insulated from the banking turmoil in the developed economies due to their domestic-oriented business portfolios and loan book. ASEAN banks are also well diversified across different industries and geographies within the region.

Positioning in Reopening Winners in China and Asia

We are fully overweight on China and EM Asia equities due to their resilient domestic fundamentals, positive growth outlook and attractive risk-reward profile. China’s policy pivot towards growth stabilisation is strategic and supported through multiple policy levers, and is less prone to U-turns than many investors seem to fear. China’s consumption-led recovery will not only support Asia growth but will also reduce the risk of a global recession.

Our high conviction theme on Asia’s reopening winners position in the beneficiaries of China’s speedy reopening and resumption of international travel. We favour quality leaders in travel, airlines, mass consumption, hospitality, food and beverages and Macau gaming sectors. China’s rapid reopening should lead to broadening of economic recovery; we like blue chip Chinese internet leaders which will benefit from the more supportive government policy, asset restructuring and fundraising opportunities, better growth outlook and improving consumer confidence. China’s accelerating housing recovery will boost demand for metals and construction equipment.

In Hong Kong, we see positive recovery outlook for the retail landlords due to expected improvement in occupancy rates, positive rental reversion and additional revenue from turnover rents. We think the insurance sector in mainland China and Hong Kong can benefit from a normalisation of activity levels, just as banks and stock exchanges can.

The ASEAN economies also emerge as major beneficiaries of China’s border reopening, as Thailand, Vietnam and Singapore are the top three travel destinations in Southeast Asia most favoured by mainland Chinese tourists. In Thailand and Vietnam, Chinese tourists made up about 30% of their overseas visitors before the pandemic. In Thailand, the government targets 5 million tourists from mainland China to visit the country this year, implying total tourist arrivals will almost triple 2022’s levels. According to the United Nations World Tourism Organization, last year the return of international visitors to Asia Pacific only reached 23% of pre-pandemic levels, setting the stage for a strong recovery to take place in 2023.

Green Transition and ASEAN Growth

Asia’s green transformation continues to be our high conviction theme, focusing on opportunities from the energy transition and independence, green infrastructure development and innovation of new energy vehicles technologies in the region. According to McKinsey, the addressable market size for green businesses in Asia is expected to reach between US$4 trillion and US$5 trillion by 2030, as sustainability is increasingly valued by various stakeholders, including investors, customers and employees.

China’s transition towards renewable energy and electric vehicles is well underway, backed by strong policy support and catalysed by the global energy crisis. During the March National People’s Congress, the government announced fiscal stimulus measures, including targeted tax cuts and fee reductions for green transition and exemptions of purchase taxes for new electric vehicles. Following the normalisation of construction activities post-Covid, our 2023 solar installation forecast for China is now at 120 GW, translating into robust growth of 38% y-o-y. On the other hand, energy storage is gaining traction, in particular batteries that are used in new energy vehicles and the renewable energy industry.

Apart from cyclical catalysts, the ASEAN economies ride on structural growth tailwinds in the next decade with the economic gravity shifting to Southeast Asia. Our high conviction theme on “ASEAN Tigers” captures secular growth opportunities in ASEAN consumption companies, infrastructure plays, banks and Singaporean REITs. ASEAN economies were supercharged by robust domestic demand and reopening tailwinds in 2022. We expect consumption to stay supportive of growth, though with a smaller impact given slowing global growth and base effects.

Asian Quality Credit for Resilient Carry Opportunities

As the Fed is stepping closer to the end of its tightening cycle, we see an improving outlook for the Asian credit market. We are bullish on the theme on Asian quality credit as we see an opportune time to switch from time deposits to high-quality credits to lock in yields at attractive levels. Within Asian fixed income, our duration preference remains short to medium, taking advantage of the inverted credit curve.

In terms of high-quality corporate bonds in Asia, we find a few sectors offering attractive investment cases, including high-quality Hong Kong corporate bonds which enjoy reopening tailwinds, Chinese technology, media and telecommunications (TMT) bonds on the back of normalisation in regulatory environment and Indonesian quasi-sovereign high-grade bonds given the country’s improving fundamentals.

Within the China property credit market, we continue to prefer higher quality issuers including the state-owned developers which have much stronger financial positions compared to privately-owned and highly geared developers.

About Fan Cheuk Wan
Fan Cheuk Wan is a member of the Global Investment Committee for Global Private Banking and Wealth and Chair of the Regional Investment Committee in Asia. Fan has 28 years of investment experience and is responsible for developing investment strategies and themes across all asset classes for private banking and wealth clients in Asia. With her investment expertise and wealth of market knowledge, her views are always sought after by the media, including Bloomberg TV, CNBC, Cable TV, NOW TV and Channel NewsAsia.

In an increasingly complex market environment, entrepreneurs are faced with challenges not just related to running their businesses, but also managing their accumulated wealth.

Customized Solutions for Different Entrepreneurial Needs

Partnering with the right private bank and wealth advisor is pivotal in setting up a path to success for their businesses and personal goals. With a customized and holistic wealth and legacy plan, be it guiding them through transitions such as liquidity events, or realizing their philanthropic aspirations, entrepreneurs are able to focus on their day-to-day business operations and success.

J.P. Morgan Private Bank clients are able to leverage the bank’s established global network, as well as access its comprehensive services in corporate and investment banking, commercial banking and asset management, giving J.P. Morgan Private Bank the capability to customize solutions for every stage of an entrepreneur’s business life cycle and private wealth journey.

Narrowing the Accessibility Gap

J.P. Morgan caters to the needs of established entrepreneurs who have accumulated substantial wealth, as well as startup founders beginning to make their mark on the business world. Unsurprisingly, the needs of these two groups differ greatly.

For example, startups are looking for connections and networks that can help take their businesses to the next level of growth, including funding needs. This goal is more challenging for enterprises led by women, who are faced with higher hurdles compared to their male counterparts.

A J.P. Morgan report found that women-powered businesses—defined as businesses founded and led by women—represent only 5.7% of around 15,000 high-growth businesses identified across Asia Pacific (APAC).

“The study confirms our observations that women are severely underrepresented in high-growth businesses in APAC. However, even when faced with the challenges of Covid-19, there has been an increase in the absolute number of women-powered businesses in APAC compared to five years ago, much more progress can be made to accelerate the pace of growth,” says Kam Shing Kwang, CEO of J.P. Morgan Private Bank in Asia and the Vice Chair of Investment Banking for Greater China.

“The year ahead will undoubtedly be challenging with a global economic slowdown looming. However, we are confident that as more women come together—through networks and government-aided initiatives—this statistic will continue to see an upward trend.”

The report aligns with our firmwide commitment to empower and fuel women’s ambitions by advancing financial equality at J.P. Morgan and in our local communities. This mission is driven by our global initiative called “Women on the Move,” formed in 2013 to support women in both their personal and professional lives.

“At J.P. Morgan, we are committed to playing our part in addressing gender equality—beginning with setting the tone from the top. In APAC, we have a number of senior women leaders who lead by example and help set precedent—and it shows, as The Private Bank leadership team in the region has equal representation,” says Kwang.

Jumpstarting Connections

The same study highlighted that entrepreneurs and leaders prioritize the importance of having a strong network that can help them build their expertise, as well as find champions and mentors to help them in their journeys.

“Starting a business is not easy. Many entrepreneurs have shared that the barriers they face as women, especially in certain sectors that are male-dominated, are significantly higher,” says Karen Tan, Head of Wealth Advisory for Singapore and Southeast Asia at J.P. Morgan Private Bank.

“At The Private Bank we leverage our global connections to bring together entrepreneurs to facilitate network building, linking them up with not just like-minded individuals in the entrepreneurial space, but also our client network and family offices who are keen to diversify their portfolios. We are committed to fuel the ambition and success of all women and support them in our communities—creating platforms to facilitate networking, knowledge and advice for women entrepreneurs, with the report’s focus on high-growth businesses in APAC.”

“At J.P. Morgan, we are committed to playing our part in addressing gender equality—beginning with setting the tone from the top. In APAC, we have a number of senior women leaders who lead by example and help set precedent—and it shows, as The Private Bank leadership team in the region has equal representation,” says Kwang.

Supporting Evolving Needs

J.P. Morgan advises entrepreneurs to help them grow and preserve their wealth, and provides support in important areas such as succession planning and philanthropy, offering sound and practical advice on creating a lasting legacy for them and the families, and the causes that they are passionate about.

“The needs of entrepreneurs tend to evolve over time with changes in their business and family circumstances. J.P. Morgan advises them over the course of this journey, helping them to think about their portfolios, their succession plans and giving back to the community,” says Tan. She notes that with longer life expectancies, women have an even greater need for support in their long-term wealth planning.

J.P. Morgan does this with its differentiated “goals-based” planning approach to help entrepreneurs manage their wealth over their lifetimes, as well as craft strategies for wealth transfer to the next generation. This involves determining what a client wants to achieve with their wealth, who could be best suited to take responsibility for its management, how assets should be held and how to prepare them for any future transfer.

J.P. Morgan’s global connectivity and universal banking capabilities also ensure that The Private Bank is able to serve its clients’ business and personal wealth needs across multiple geographies. For instance, the Bank has a dedicated team, 23 Wall, that provides the world’s most prominent families with access to the firm’s entire intellectual capital, balance sheet and deal flow around the world.

These capabilities are also backed by the firm’s fortress balance sheet, which helps to assuage any concerns over security and safety in an uncertain environment.

Investing for Future Growth

J.P. Morgan prioritizes investing in talent and technology to ensure the effective and efficient solutions and services are available to entrepreneurs around the world. Coupled with The Private Bank’s tried-and-tested “Integrated Team Model,” which provides clients direct access to a suite of specialists and experts, entrepreneurs can then focus on growing their businesses and taking it to the next level.

Looking ahead, it is critical for entrepreneurs to work with the right banking partner that can help bolster their wealth aspirations amid ongoing market uncertainties.

Whether you’re a successful entrepreneur or just starting out, The Private Bank is fully equipped to help you through different stages of growth, to achieve even greater success. J.P. Morgan Private Bank has been a trusted partner to entrepreneurs in Asia and beyond and is well positioned to navigate the entrepreneurial journey ahead.



Establishing Philanthropic Purpose

Giving back to the community has become a priority for many entrepreneurs and family businesses in Asia Pacific. Even in their investing activities, they are not only thinking for profit, but also for purpose.

To this end, a rising number of family businesses in the region are keen to set up philanthropic foundations to support causes that are meaningful to them. Others are also eager to help startups, not just in terms of funding, but also providing advice and mentorship to these budding enterprises.

“In the U.S., we already see so much being done by entrepreneurs to give back, and we are seeing greater interest and activity in the region, especially in places like Singapore and Hong Kong. We have witnessed wealthy families and successful entrepreneurs finding new avenues to pass on their wealth meaningfully and thoughtfully—with impact,” says Karen Tan, Head of Wealth Advisory for Singapore and Southeast Asia at J.P. Morgan Private Bank.

To help them in this growing space, The Philanthropy Centre at J.P. Morgan tailors its advisory service for clients at different stages of their donor journeys. When working with first-time philanthropists, the team focuses on helping them identify and articulate their passions, with the aim of understanding their primary giving interests and the social issues closest to their hearts.

Sometimes it involves building on a framework passed on to them by their predecessors, and coming up with a refined plan with specific and measurable goals that address issues they are most passionate about. In addition to mapping out their philanthropic journey, the team at J.P. Morgan Private Bank has the capability to advise which vehicles could be adopted to effectively achieve specific charitable goals, as well as provide the access to collaborate across the private and public sector—to collectively move the dial.

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After nearly three years of pandemic-fueled anxiety, there has been no let-up in the challenges weighing on wealthy investors in Asia and the rest of the world. Faced with persistently high inflation, rising interest rates and ongoing geopolitical tensions, high net worth (HNW) and ultra-high net worth (UHNW) individuals and families are seeking guidance to grow and preserve their wealth during this volatile period.

“The pandemic has prompted our clients to think more about intergenerational wealth succession. And the changing geopolitical dynamics have further reinforced this need for them to protect and preserve their wealth,” says Bryce Wan, Market Head of North Asia, HSBC Global Private Banking.

With a long history of success in Asia, HSBC Global Private Banking (GPB) is leveraging its comprehensive wealth and banking expertise, international network and digital capabilities to help clients in the region realize their wealth ambitions. In Asia, HSBC GPB has regularly demonstrated its award-winning capabilities in alternatives, credit advisory, wealth planning and philanthropy.

Building Resilience into Portfolios

Against a backdrop of uncertainty, HNW clients are keen to build more resilience into their investments as a buffer against volatility. To this end, HSBC GPB is advising them to rebalance their portfolios towards fixed income, while still taking on some “recession-resilient” risk on the equity side, particularly in the U.S. and Asia.

“On a risk-adjusted basis, fixed income underperformed equities last year, and rates are peaking, so that is a favorable investment environment for bonds, especially mid-duration and quality names,” says Sami Abouzahr, Head of Investments and Wealth Solutions, Hong Kong, HSBC Global Private Banking and Wealth.

He also advises investors to further diversify their portfolios through alternative assets, and to look beyond the immediate to capture opportunities in longer-term structural trends such as green transformation, energy security and smart mobility, among others.

Preserving wealth is just as important as growing wealth. HSBC GPB is also well positioned to support clients in their legacy and succession planning efforts through its market-leading trustee business, protecting and preserving their wealth across generations and geographies. Established in 1946, HSBC Trustee offers clients global coverage with trust companies in Hong Kong, Singapore, Delaware, New York in the U.S. and Jersey in the Channel Islands.

Diversification Remains Critical

Diversification continues to be a key strategy to mitigate risk, and HSBC GPB can optimally help investors diversify their portfolios across assets and geographies. To do so, the bank provides its clients access to global wealth hubs and solutions across four regions—the Americas, Europe, the Middle East and Asia Pacific—through 11 booking centers. Meanwhile, HSBC GPB has over 650 experts worldwide connecting its clients to international opportunities.

HSBC GPB also boasts a successful track record in the alternative investment space, and is able to help investors seek out assets, such as private equity or hedge funds, to potentially reduce the overall risk of their portfolios, as well as uncover uncorrelated opportunities.

“Private individuals have been on a journey to institutionalize how they invest—moving away from short-term trades to long-term investments and structured portfolios. And increasing their exposure to alternatives has been a part of that journey,” says Abouzahr.

“We have been managing alternative investments for 25 years, so we are very familiar with the space. We have the expertise, the connections and the knowledge to help our clients build different kinds of alternatives and integrate them into their portfolios.”

Digital Leadership

To cater to the next generation’s digital needs and enhance client experience, HSBC GPB has been heavily investing in its digital capabilities.

Indeed, HSBC GPB has invested over US$200 million over a four-year period to build and innovate its core banking and digital platforms. This commitment to digitalization has led to greater convenience and better user experience for clients, including a strong uptake of HSBC GPB’s online trading capabilities, with over 35% of execution-only trades in Asia being completed online.

“We are using digital solutions to simplify and enhance everything to do with clients, from trading to accessing market insights or viewing their portfolios. Our recently launched HSBC Prism Advisory in Asia, a portfolio-based advisory and investment service for GPB and eligible retail wealth clients is a great example of how we are combining expert advice with digital capabilities and institutional-grade risk analytics,” says Abouzahr.

“They can also engage with their relationship managers and investment counselors through instant chat on WhatsApp or WeChat in a secure manner via our client messaging platform, HSBC GPB Chat.”

Solutions Spanning the Wealth Journey

As the wealth of Asia’s HNW and UHNW families are largely derived from successful enterprises, their wealth needs tend to span both personal and business, and are likely to evolve over time. HSBC’s “universal banking model” allows the private bank to bring the capabilities of the entire group—from retail and commercial banking to asset management and philanthropy—to meet the diverse needs of their clients over their entire wealth journey.

Collectively, HSBC GPB’s market-leading capabilities and global network enable it to provide clients in Asia with a “one-stop” solution that caters to their complex and changing needs under one trusted brand.

“We are able to take care of our clients through the wealth lifecycle, from the moment they start to build their wealth to the time they decide to pass on their wealth to the next generation, or give back to society,” says Wan.

He adds: “HSBC GPB is in a unique position to provide a full service to our clients, offering a global presence with local expertise, while staying at the forefront in terms of digital and products. This is critical for HNW and UHNW individuals and families in Asia as they look to grow and preserve their wealth in an increasingly complex environment.”

Southeast Asia (SEA) plays a pivotal role in the world’s net zero transition. Southeast Asia is rich in natural resources and at the heart of many supply routes across the globe. The region holds some of the most valuable natural biodiversity in rainforests, mangroves, and peatlands.

However, Southeast Asia is also extremely vulnerable to global warming. Asia has 99 of the 100 most environmentally at-risk cities and crop yields could fall as much as 22% by 2050.

The good news is that many Southeast Asian governments have pledged ambitious carbon neutrality plans backed by massive stimulus to push for green and sustainable industries. And for good reason as the stakes are high.

As part of wider response measures, Southeast Asia’s governments are pledging investment in green technology. These commitments not only seek to address the immediate climate issues but have the potential to create more than US$1 trillion in annual economic opportunities by 2030, according to Bain.

For investors, this is a nascent opportunity as an emerging thematic trend. But knowing where governments and industry will focus efforts could build resilience into your portfolio to grow in tandem with the markets.

Here are themes and market developments to look out for.

#1: Building sustainable smart cities:
Southeast Asia is expecting a population surge of 90 million in the next decade, which will put more stress on existing infrastructure. Cities are a key contributor to climate change, responsible for 75% of carbon emissions, with transport and buildings being the largest emitters. Smart building solutions can unlock cost savings by adopting efficient energy usage.

However, to solve climate change, the future of transport has to be electric, which is insignificant at under 1% of market penetration globally. Indonesia has an ambitious target of producing 20% of electric vehicles of their total production in the next five years.

Globally, electric vehicles are expected to grow by 36% annually, reaching 245 million vehicles in 2030—more than 30 times above today’s level. Southeast Asia, coming from a low base, is expected to see bigger exponential expansion. In the region, electric two and three-wheelers will represent the lion’s share of the total electric vehicle fleet, as this category is most suited to rapid transition to electric drive.

With such goals, there will be immense improvement s in electric vehicle infrastructure. For example, Singapore is aiming to deploy 60,000 charging points and require all newly-registered cars to be cleaner-energy models by 2030 and phase out internal combustion engines by 2040.

#2: Transitioning to greener energy:
In the region, resource extraction and energy generation are still very much coal-reliant and inefficient, and must be decarbonised in a sustainable manner. ASEAN has set a target of 23% share of renewable energy in primary energy supply by 2025.

It is not realistic to suddenly replace fossil fuels with renewables. However, the transition to natural gas is one low-hanging fruit. The advancement of green hydrogen technology can possibly be a solution, but solar and wind has the potential to grow significantly due to substantial land mass in the region.

In Singapore, the government has commit ted to quadruple solar energy deployment by 2025, including covering the rooftops of public housing blocks with solar panels. In another decade, the ambition is to deploy five times that of today, with at least a two gigawatt-peak, capable of powering over 350,000 households a year.

Singapore can also play a crucial role as a clean tech hub as a test bed of commercialisation for new green technologies—such as green hydrogen and battery storage capabilities—and scale these solutions in other markets.

#3: Securing sustainable food chains:
Agricultural practices are subsistence and inefficient in many parts of the region, however, employing technology and localising production are key to feeding a growing and large urban population in a sustainable manner.

Singapore, as a small city with limited land for traditional agriculture, wants to increase its local food production through vertical farms and sustainable aquaculture that can increase yield.

Also, take for instance the upside in development of alternative plant-based protein, which is estimated to generate US$14 billion by 2025, globally. Singapore can be the launchpad for alternative plant-protein research such as cell-cultured protein, and the development of a plant-protein production hub for the region.

Indeed, sustainable agriculture and food technology can be scaled across SEA improving yield, production and security significantly.

#4: Reconfiguring to more efficient supply chains:
SEA’s manufacturing hub can become a viable alternative to China—and supply chains can be reconfigured sustainability. As supply chains shift to this region, more robotics and automation will be employed to improve productivity and energy efficiency.

Furthermore, the implementation of the Regional Comprehensive Economic Partnerships (RCEP), will allow a standardisation of cross-border regulations, which will promote trade efficiencies, streamline logistics and eventually reduce carbon emissions.

Capturing Southeast Asia’s Green Transition

Southeast Asia’s green transition should not be ignored by investors.

The investment case for Southeast Asia’s green opportunities will evolve from a small set of pure play renewable and clean tech companies to a broader set of opportunities across the whole economy. All companies across all sectors will be affected by climate change and are pressured by their shareholders to become net zero and have an action plan in place.

There is growing evidence that investors in the region have recognised the importance of the net zero transition. In Indonesia, Southeast Asia’s largest economy, there is growing demand for ESG solutions from investors, including high net worth and ultra-high net worth (UHNW) individuals and families.

Like their peers in other parts of Asia, Indonesia’s wealthiest are allocating a greater portion of their portfolios to ESG products. This is expected to gain pace as wealth continues to accumulate in the country. According to Statista, the number of UHNW individuals residing in Indonesia is forecasted to increase to over 1,100 in 2025, from 630 in 2020. Meanwhile, HSBC research shows that it is projected that Indonesia’s aggregated financial wealth is expected to grow by over 120% from 2022 to 2030.

The trend will also be fueled by Indonesia’s sustainable transformation. A study by PwC found that ESG is a top business priority for Indonesia, with the government introducing regulatory changes to strengthen the sustainable investment landscape.

On this front, HSBC helps its UHNW clients in Southeast Asia build more resilient portfolios by delivering a range of ESG investment solutions; encompassing a biodiversity thematic discretionary mandate, sustainable core multi-asset solutions and private equity impact funds.

There is a need for investors to be aware of these trends and avoid companies that fail to adapt to these changes. At the same time, investors can gain exposure to Southeast Asia’s green opportunities either through global companies—with strong ESG scores that are adapting to these trends, or pure-play companies that are pushing the boundaries of green innovation.

As Southeast Asia’s transition into a green economy gains traction, knowing what lies ahead will position your portfolio to capture a golden value creation opportunity.

About James Cheo
Mr. Cheo is a member of the Global Investment Committee for Private Banking and Wealth Management and also a member of the Regional Investment Committee in Asia. In his role, he spearheads the development of investment strategies across all asset classes for global private banking and wealth management clients in Southeast Asia. With his knowledge and wealth of experience, his investment views are frequently sought after, with appearances on notable financial media including BBC, Bloomberg, CNBC, and Channel News Asia.

With the expansion of its onshore private banking business in mainland China earlier this year, HSBC has made clear its commitment to one of the world’s largest and fastest-growing wealth markets. Combined with its well-established offshore business, HSBC Global Private Banking (GPB) is now able to seamlessly deliver the group’s comprehensive suite of solutions and access to its international network to the mainland’s high net worth (HNW) and ultra-high net worth (UHNW) families.

The expansion in mainland China is integral to the bank’s bold ambition to be Asia’s leading wealth manager, says Siew Meng Tan, Regional Head of HSBC Global Private Banking, Asia Pacific. “Mainland China represents the largest and fastest growing wealth pool in the world. If we want to be Asia’s leading wealth manager, we need to be able to leverage this huge opportunity in front of us,” she says.

Research shows that by 2025, the total wealth of Chinese households is projected to grow by more than 50%, while the number of HNW individuals is also expected to rise to five million.

As the needs of Chinese HNW and UHNW individuals become more sophisticated, in particular those of the younger generation, they are seeking banks that can provide them with international and professional insights and expertise to meet their increasingly complex needs. By marrying expert local knowledge with global connectivity, HSBC is ideally suited to fill this gap.

“The internationally minded younger generation want the views and vision of international financial institutions like us to give them global perspectives,” explains Jackie Mau, Head of Global Private Banking, HSBC China.

Expanding Services to Meet Rapidly Growing New Demands

HSBC expanded its Chinese onshore private banking business in May this year, establishing dedicated teams in the Tier 1 cities of Beijing, Shanghai, Guangzhou and Shenzhen. It further extended its business to Chengdu and Hangzhou this October, making it the first international bank to set up a dedicated private banking service team in western China, while strengthening its service capabilities in the Yangtze River Delta region where successful entrepreneurs, especially in the dynamic digital and technology sectors, are creating new wealth and demand for wealth management is growing rapidly.

“Many of our Chinese clients are already banking with us offshore, but an average 80% of their wealth is onshore, so it was a very natural opportunity for us to support them with an onshore presence, and provide more professional and private banking services to help them manage their onshore wealth and family needs in China,” says Mau.

With an enhanced presence in mainland China, HSBC can now offer each of its private banking clients a dedicated Relationship Manager and Investment Counsellor who can help them achieve a more robust asset allocation, as well as create tailor-made solutions.

HSBC Global Private Banking also works closely with the group’s commercial bank and insurance arm in mainland China, as well as HSBC Qianhai Securities, to deliver solutions across the entire spectrum of financial needs. “We are the only foreign private bank with such an extensive footprint on the ground in China. At the same time, we are leveraging the entire HSBC ecosystem to offer holistic banking services to our clients,” Mau adds.

This support extends not just to clients’ personal wealth or business activities, but also to meeting their family needs. This can include helping clients with financial aspects of their children’s overseas education, whether applying for a credit card or opening a bank account in a foreign country.

As many HNW and UHNW Chinese adopt a more international outlook, HSBC’s truly global network—covering 64 markets and with Global Private Banking & Wealth serving 35 of these—is another major draw for mainland clients. “Chinese clients are looking beyond just Asia because of their international lifestyles, and therein lies the importance of the offshore and onshore strategy for us. The fact that we are already the largest international bank in mainland China puts us in a leading position to serve these clients,” says Tan.

Planning for Sustainable Futures

HSBC is tapping on its expertise in legacy and succession planning to support HNW and UHNW Chinese as they prepare for a significant wealth transfer to the next generation in the coming years. With over 75 years of experience working with families around the world, our HSBC Trustee offers global coverage with trust companies conveniently located in Hong Kong, Singapore, Delaware and New York in the US, and Jersey in the Channel Islands to help clients plan for their future and manage a smooth handover of their wealth.

“Clients want to work with a partner that they know is going to be around for many generations; someone they can trust to help them carry on their legacy for future generations,” says Tan. To this end, HSBC also conducts programmes for our next-generation UHNW clients to expand their horizons to become the future leaders.

Many among China’s wealthy are also keen to give back to society as part of their legacy. To support them, HSBC has established a series of events under its “HSBC GPB China Philanthropy Forum” initiative to share knowledge and connect like-minded families.

On its part, HSBC in mainland China has also demonstrated its commitment to give back to the communities it operates in. For instance, by the end of 2021, HSBC had made accumulated donations of nearly RMB1.3 billion (US$181 million) in mainland China, supporting rural revitalisation, financial education, environmental conservation, elderly care, child welfare, community development, innovation and entrepreneurship, as well as pandemic control and disaster relief.

Another fast-expanding sphere of interest among Chinese HNW and UHNW clients is sustainability, and in particular ESG investments. With many of its Chinese clients already investing in ESG through offshore wealth hubs such as Singapore and Hong Kong, HSBC is committed to enhancing its offerings in this space through continued innovation and product development in the coming years.

In 2022, HSBC has hired about 100 employees to support the rapid expansion of its Chinese onshore private banking business. Looking ahead, HSBC will further expand its onshore GPB team size three-fold in the next five years, with a focus on grooming local talent. The bank will also continue to invest in new products and digital platforms to enhance the level of service and solutions it can deliver to Chinese clients onshore.

“Many Chinese clients are now looking for professional partners who will guide them in an increasingly complex environment, and work alongside them to find the right solutions for their needs,” Tan notes. “As such, we will continue to invest in the talent and capabilities of our onshore business in China, with the objective of growing our share in this dynamic market.”

In the face of an increasingly volatile environment, ultra-high net worth (UHNW) families in Asia and the rest of the world are seeking bespoke wealth solutions that can meet their increasingly complex and unique needs.

The answer for many has come in the form of single-family offices dedicated to managing the finances of established families. These entities have been estimated to manage more than US$6 trillion in funds, or more than the total handled by hedge funds globally.¹

And, as Asia’s wealth creation story is still being written, such family offices—which typically cater to investors worth over US$100 million—are likely to gain even greater prominence. Experts argue that these entities offer the flexibility, balance sheets and long-term horizon to thrive even in a downturn.

“It’s hard for business owners or wealthy families to decipher everything that’s happening in the investment world on their own because it has become more uncertain partly due to a complicated global macro environment between inflation, currency volatility, energy supply and growth uncertainty. In the past these families would focus on equities and bonds, but as their understanding of long-term wealth management increases, many are starting to realize that they need to build a balanced portfolio with exposure to different asset classes to help them achieve their multi-generational financial goals,” says Ulysses Lau, Managing Director, Head of Investments and Advice for Hong Kong and the Philippines at J.P. Morgan.

“So, this shift in needs, coupled with the creation of new billionaires, has pushed up demand for single-family offices over the past few years.”

Meanwhile, with Asia preparing for a remarkable transfer of wealth to the next generation in the coming years, a younger set of investors are seeking more control over the way they manage their family fortunes; something a family office structure provides a platform for.

While family offices in some form have been around for centuries—indeed, J.P. Morgan has been an industry leader in serving the needs of ultra-high net worth families since its inception—today’s larger versions operate more like full-service global investment firms; trading not just traditional asset classes such as equities and fixed income, but also currencies, commodities as well as emerging asset classes such as digital assets.

Many also invest in real estate, private equity and venture capital funds, and even engage in their own private acquisitions and start-up deals. Such direct investments tend to provide family offices with better returns over the long run. It also gives business owners who have sold their enterprises a platform to lend their expertise to start-ups in an industry they are intimately familiar with.

“Single-family offices today are more sophisticated than ever before and tend to be a crossover private equity fund or a sovereign. Many have up to 100 to 150 financial experts, so they have institutional-level scale,” says Andrew L. Cohen, Executive Chairman of the Global Private Bank and a Global Chair of Investment Banking at J.P. Morgan.

Access to Institutional-Level Services

Global financial institutions such as J.P. Morgan have been helping their clients in the single-family office space for many decades by granting them access to the same level of service and expertise as their institutional clients.

“The needs of wealthy families today are very much institutional in nature, and they access all other lines of business within the J.P. Morgan franchise ranging from investment banking, corporate banking, asset management and risk management as well as custody and philanthropy services,” says Catherine Chin, Executive Director, Asia Head of Morgan Private Ventures at J.P. Morgan, who is responsible for providing institutional level access for the clients of J.P. Morgan.

The bank also facilitates the sharing of knowledge between its network of single-family offices around the world. “We are able to connect like-minded families and give them an avenue to share their thinking. This can range from sharing best practices for their family offices to exchanging thoughts on navigating volatile markets and the prospect of emerging risks given a backdrop of weaker global growth,” reveals Chin.

Aiding Philanthropic Commitment Amid Volatility

Having found success in the business world, more of Asia’s wealthy are now seeking to use their fortunes to make a positive social impact. J.P. Morgan leverages an endowment model of investing to help its single-family office clients meet their philanthropic commitments, regardless of how markets perform. An endowment model typically consists of a mix of traditional investments and alternative investments, such as hedge funds and private equity.

“For a traditional portfolio, it’s fine when there’s volatility in the markets because we look at it on a long-term basis. However, a family may have certain philanthropic commitments they need to fulfill every year, so we need to manage the portfolio differently so that it is able to generate enough returns to meet those commitments,” explains Lau.

To this end, J.P. Morgan’s Outsourced Chief Investment Office leverages expertise in endowment and alternative investments to help families to implement sophisticated one-of-a kind investment solutions designed to meet those goals.

A Bespoke, Global Partnership Model

J.P. Morgan’s commitment to single-family offices is best reflected in its establishment of a specialized offering known as 23 Wall; a reference to the bank’s original address on the corner of Wall Street and Broad Street in Lower Manhattan.

23 Wall is a specialized global team that provides the world’s largest and most sophisticated families with access to the firm’s overall intellectual capital, balance sheet, and deal flow around the world. The team engages with more than 700 families, representing over US$4.5 trillion in private family capital globally.

“At J.P. Morgan we’re constantly innovating and identifying solutions as well as leveraging intellectual capital across the firm that is valuable to families. Due to the size and sophistication of these families, we treat them as an institution. They have direct access to the investment bank (or another line of business) and 23 Wall acts as the connection between the two,” says Cohen.

23 Wall leverages J.P. Morgan’s comprehensive capabilities to ensure the power of the full J.P. Morgan Chase franchise is brought to bear for the benefit of the world’s largest families and their family offices.

“We understand that every client has different complexities and needs during different times of their wealth lifecycles. We have therefore built a team of global specialists with different capabilities and skills that are able to deliver seamless global coverage and facilitate access across every region to the relevant JPM experts,” says Natacha Minniti, Managing Director and Head of 23 Wall for Asia, Europe & the Middle East, and Latin America at J.P. Morgan.

CARRYING FORWARD THE BESPOKE BANKING LEGACY THROUGH A MODERN LENS

Andrew L. Cohen, Executive Chairman of the Global Private Bank and a Global Chair of Investment Banking at J.P. Morgan, talks about what makes the bank’s bespoke team, 23 Wall, relevant for today’s largest and most sophisticated families.

What was the motivation for setting up 23 Wall?
The name 23 Wall refers to the address of the original J.P. Morgan headquarters in New York. The name reflects the firm’s commitment to work with families today as we did originally—holistically across all lines of business as one firm and one responsibility to conduct “first-class business in a first-class way”.

We wanted to embrace the legacy of J.P. Morgan himself and subsequent generations who have continued to innovate—bringing us to 23 Wall today. Essentially, we have taken that historical context and reconceptualized this for the pressing needs of today’s accomplished families. We want to deliver the entirety of J.P. Morgan to the right families matched by their sophistication and the size of their assets. This means that we will treat our subset of sophisticated clients like institutions in terms of capabilities, intellectual capital and offering.

What are some of 23 Wall’s unique capabilities?
The purpose of 23 Wall is to help families navigate the firm for their personal, family office, and operating business needs. The beauty of our coverage model is that we have an unrivaled global network. First, we have members of our team on the ground in 6 countries and 12 cities. Second, we have access to our partners across lines of business and finally we are able to facilitate knowledge sharing between our network of single-family offices around the world. All of this ensures seamless global coverage at every level.

Additionally, we are focused on technology and enhancing processes via digital enhancements for our clients. The digitalization of the business enables a more effective way of interpreting data into intelligence, which in turn helps to determine what is needed to map a path to the client’s goals. So, we’re using our technology platforms not just for trading and execution, but for data aggregation and figuring out how to intelligently match the client’s goals with sophisticated, diversified opportunities they can only access at J.P. Morgan’s 23 Wall.

Can you provide an example of how 23 Wall supports the aspirations of its clients?
23 Wall’s unmatched advantage is in helping clients simultaneously navigate our solutions and capabilities across lines of business as well as across regions, which is the value of having a truly global team. A more recent and relevant example was during the height of Covid-19, when a large European industrialist family approached us as they had a position in a NASDAQ-listed stock that was held via their holding company based in Singapore. Due to the nature of the complex structure, the family required a unique derivatives transaction executed in New York. The family was based in Europe, the holding company was based in Singapore, and the transaction was completed in New York—a fully cross regional effort, which the team was able to seamlessly complete. This scenario showcases the power of 23 Wall’s seamless, global coverage model and experience.

What is your outlook for the growth of 23 Wall’s business?
The types of families we get referred to are typically well diversified and have underlying operating businesses that are continuing to prosper. However, as the market environment continues to change and as intergenerational wealth transfer takes place in the next decade, our clients/families’ investment preferences and goals will inevitably evolve. 23 Wall will be there to prepare them for that change, and we see a robust pipeline of demand from the largest, global families over the long-term.

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¹ Secretive family offices manage $6 trillion globally, more than hedge funds.
Available at: https://www.cnbc.com/video/2022/07/11/secretive-family-offices-manage-6-trillion-globally-more-than-hedge-funds.html
Date as of: 11 July 2022.

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Click here for more information

learn.more@jpmorgan.com

The world’s largest migrant population, the 32 million members of the Indian diaspora, have grown in both affluence and influence around the globe. Despite their geographic diversity, global Indians have collectively become an important wealth market that share a need for sophisticated financial solutions.

To this end, HSBC—with an unparalleled global footprint and a comprehensive suite of financial services—is ideally suited to service the wealth-related needs of this group.

“HSBC is in a great position to serve ultra-high net worth (UHNW) global Indians because we are present in 63 countries and territories, more importantly, in all the markets that are of primary interest to this group of clients,” says Philip Kunz, Head of Global Private Banking, South Asia, HSBC.

“They are financially knowledgeable and tech savvy, and by virtue of many having studied or worked overseas, they are also extremely mobile and global in their way of thinking. As such, they have high expectations from the bankers who support them,” explains Kunz. “At HSBC, our relationship managers, as well as investment and product specialists, have access to both local and global expertise and solutions that cater to this very sophisticated group.”

HSBC Global Private Banking is also able to deliver the digital wealth tools and touchpoints that global Indian clients expect and it plans to invest around US$200 million over a four-year period to enhance its core banking and digital platforms in Asia.

Diverse Portfolios
Given their international perspective, UHNW Indians abroad seek out investments that span geographies and asset classes; from real estate in the U.S. to private equity in Southeast Asia.

According to research by HSBC, some 80% of global Indians—especially those in Hong Kong, Saudi Arabia, the UAE and the UK—are making investments in India. The study also found that 59% are planning to increase their levels of investment in India in the next three years, while the same proportion plan to increase investments in their country of residence.

While equities (47%) and property (46%) are the most common asset classes in their portfolios, a significant proportion are also investing in local businesses where they live, particularly in Australia, Hong Kong, the UAE and the UK.

Furthermore, global Indians are planning to make a range of sustainable investments in both India and their country of residence in the next two years. Many have also invested in private equity, especially in sectors such as technology.

The Singapore Connection
HSBC continues to scale up its capabilities in Singapore across wealth solutions and digital tools to better serve global Indians based in ASEAN, India and the UAE. Singapore and India enjoy enduring historical ties and relatively close geographic proximity, while financial links are also common. Indeed, almost nine in ten global Indians have investments in Singapore, according to HSBC.

“Studies have shown that around 23,000 millionaires have left India since 2014. In recent years, this group has started to gravitate towards Singapore because of the stable environment, strong rule of law and the government’s support of the financial services industry,” says Kunz.

The potential of the Indian diaspora prompted HSBC to be organised in a way where they can seamlessly support the wealth needs of their clients and their families as well as their businesses, regardless of where they are located.

Singapore is also a highly desirable family office locale for UHNW Indians given its sound financial regulations, strong rule of law, as well as political and economic stability.

Given the strategic importance of Singapore as an international wealth and business hub for ASEAN, HSBC has established a strong coverage team led by Anthony Hingley, Managing Director—Market Coordinator, Global India, MENA and Europe, to serve global Indian clients in this region. Based in Singapore, Hingley was appointed at the start of the year to help HSBC Global Private Banking marshal the resources of the group to meet their diverse needs.

“Anthony’s role is to ensure that we offer a cohesive and consistent delivery of our proposition and solutions to global Indian clients, regardless of where they are based, be it in Indonesia or Singapore,” says Kunz.

Meeting a Spectrum of Needs
By tapping into HSBC’s breadth of expertise, HSBC Global Private Banking can satisfy the increasingly diverse and complex demands of the global Indian client. “Whether it’s opening an additional account or getting a credit card or supporting clients’ philanthropy and legacy planning needs, we can support them given our universal banking model,” says Kunz.

Indeed, HSBC has an established retail, commercial and investment banking presence in most of the markets where global Indians are based.

“Besides being able to respond to all the variances and needs that may arise, it is particularly important to our clients that they are dealing with a brand that they can trust, and HSBC has been in most of these markets for over 100 years,” explains Kunz.

He notes that legacy planning and philanthropy are two important aspects of the global Indians wealth journey. However, these topics can be complicated as many in the Indian diaspora are made up of large families spread across many countries.

To help clients navigate this complex landscape, HSBC can tap into its experienced trustee company, which celebrated its 75th anniversary in 2021. HSBC Trustee offers clients global coverage, with trust companies conveniently located in Hong Kong, Singapore, Jersey and in Delaware and New York.

HSBC Trustee has the experience and expertise to not only provide befitting solutions, but also to ensure wealth structures remain compliant amid constant regulatory changes across jurisdictions along with trusted advisors.

More global Indian families are also keen to incorporate ESG (Environmental, Social, and Governance) factors into their investment, philanthropy and legacy planning decisions, Kunz notes.

“Their investment portfolio is becoming greener, mostly driven by the younger generation, as they want to invest their family fortunes in sustainable companies and assets. Besides being able to tap into HSBC Asset Management, given we operate on an open architecture platform, our clients have access to the best-in-class sustainable investments available in the market,” he says.

The global Indian business is an increasingly important piece in HSBC’s broader ambition to be Asia’s leading wealth manager by significantly growing its assets under management. Says Kunz: “We have the ambition to become the leader in Asia by connecting our clients to global opportunities across the wealth continuum. Regardless of where they are, we can help them fulfill not just their financial ambitions, but also realise their dreams and aspirations.”

The real economy, as the foundation of the new development paradigm of China, is charged with the mission and vision of developing the country through development of industries. “The real economy cannot grow without the support of finance. The Chinese private banking industry should give play to its resource endowment and capability advantages in its position as the ‘intersection’ of retail banking, corporate banking and investment banking businesses and the top of the whole retail finance ecosystem to deliver financial vitality to the real economy and serve the entrepreneur group and the real economy they represent,” said Li Baoquan, General Manager of the Private Banking Department of ICBC.

Empowering the real economy with comprehensive services. As main financial service providers to the real economy, commercial banks play a vital role. Upholding the business philosophy of “integrity and steadiness”, ICBC Private Banking has promoted the integrated development of “family business, enterprises and industries”. We joined hands with entrepreneurs, seized the opportunities of national policies and made best use of ICBC’s professional advantages to jointly build a bank-enterprise ecosystem with quality enterprises, supporting the transformation and upgrading of the Chinese economy.

Developing charitable trust to assist inheritance of family businesses. The nature of wealth management is to improve the efficiency of asset allocation and support and share the value from the growth of excellent enterprises. The biggest good about wealth management is that the wealth management service provider can help others achieve success while helping itself. The “Charitable Trust for Partners” from ICBC Private Banking always assists clients achieving inheritance of both material and spiritual wealth, channeling wealth to public service fields and thus promoting common prosperity.

Bringing services deep into communities. The demand for financial services is growing. Over 70% of ICBC’s private banking clients are private business owners. To provide more convenient and better services to clients, ICBC has set up “ICBC Sharing Station” on the basis of existing service centers for the convenience of people. ICBC Private Banking has upgraded the comprehensive services for entrepreneurs in all respects and built the “finance + pan-finance” service system.

Developing green finance to support ”carbon peak and carbon neutrality”. The financial sector shall channel more funds into green-related industries, advocate green production, and encourage green consumption. With a deep understanding of green finance policies and regulations, ICBC Private Banking has developed well-matched high-quality financial services for high-quality development, and continued to improve the quality and efficiency of green finance services, to support the achievement of “carbon peak and carbon neutrality” goals.

Taking coordinated actions to support enterprises amid the pandemic. Affected by the pandemic, enterprises are suffering from shortage of working capital, while banks are facing obstacles in operation at brick-and-mortar outlets. Banks are required to strengthen online services to meet every service need as far as possible. ICBC Private Banking has taken coordinated actions to ensure the operation of primary-level institutions and services and kept improving the quality and efficiency of financial services.

Looking back, ICBC always put clients in the first place and gave full play to its advantages as a large bank to support the development of the private sector. Through charitable trusts, ICBC contributed its bit to common prosperity. Looking forward, ICBC Private Banking will continue to create social value, fulfill social responsibilities and improve the level of financial services for the real economy. We will keep a foothold in the new development stage, integrate into the new development paradigm, build a corporate-private integrated service platform for entrepreneurs, and promote sustained and coordinated development of enterprises with the economy, society and environment.

Asia continues to generate wealth at an impressive pace, even as headwinds continue to moderate economic growth. According to HSBC Global Research, wealth in Asia excluding Japan could outstrip the U.S. by 2025. The number of millionaires across Asia is projected to jump from roughly 30 million to over 76 million by 2030, with Singapore expected to overtake Australia’s millionaire population.

However, managing these expanding pools of wealth has become more complex due to a confluence of factors, from the effects of the pandemic and inflation to heightened geo-political tensions and recession risks.

In particular, fears over stagflation have adversely impacted both bond and equity markets in the first half of 2022. Rising consumer prices have forced central banks around the world to tighten monetary policy, resulting in challenging conditions for bonds. Equities, too, have been hit by concerns over a slowing economy and the threat of inflation denting the bottom line.

“This complexity impacts our clients, their current investments and long-term wealth goals, so we have been focused on providing the advice and services they need during these challenging times, both with respect to managing the risks and taking advantage of opportunities,” says Annabel Spring, CEO, Global Private Banking and Wealth, HSBC.

In light of these challenges, clients are currently focused on increasing the resilience of their portfolios, as well as managing their legacy and succession plans. A younger
generation of affluent investors is also demanding mobile convenience when it comes to managing their wealth, and incorporating environmental and social purpose into their investment decisions.

In terms of diversification, investors should seek out alternative assets such as private equity or credit, hedge funds and commodities to potentially reduce the overall risk in a portfolio, and to uncover uncorrelated opportunities.

Clients should also consider building multiple income sources, with cash flows that can reset higher in the event of rising inflation. Such income streams include infrastructure, private credit, real estate, floating rate bonds and dividend growers. Finally, investors should favor the stocks of high-quality companies that have the capacity to maintain profit margins even as costs rise.

“In an uncertain world, it is wise to build resilient portfolios to weather the likely bouts of volatility and not to ignore the wide range of opportunities,” explains Siew Meng Tan, Regional Head of Global Private Banking, Asia Pacific, HSBC.

“Our investment strategy specifically focuses on quality earnings, resilient income and multi-asset diversification to dampen market volatility and help clients to stay invested and capture opportunities. A focus on quality means selecting companies and areas with the most resilient fundamentals. Looking at income allows investors to take advantage of increased yields and helps mitigate market volatility. Lastly, diversification helps uncover opportunities in alternative assets.”

Sustainable investments are another way to build long-term resilience and capture future growth opportunities. On this front, the bank is able to deliver innovative ESG (environmental, social, and governance) solutions to its clients. These include, among many others, a biodiversity thematic discretionary mandate, sustainable core multi-asset solutions and private equity impact funds.

Leveraging a Global Footprint
Investors should not only pursue asset class diversification, but also geographical diversification, in an effort to reduce portfolio risk. With its global footprint, HSBC is well-positioned to offer international opportunities and capabilities that span numerous markets around the world.

“Our international network and connectivity across the Group are particularly valuable for our ultra-high net worth (UHNW) clients, whose complex needs and objectives are typically global in scope and span personal, family and business interests,” says Spring.

HSBC has a unique client servicing model, where a primary relationship manager leads the global coverage team of relationship managers across Global Private Banking (GPB) offices to look after clients’ global portfolio and needs. With the client’s consent, HSBC is then able to work closely with the client and their representatives globally.

“We onboarded a new client in Hong Kong recently who was impressed by our smooth introduction and onboarding process in the UK for his child, who is studying overseas, as well as our capabilities across different GPB offices to meet his asset diversification and wealth-planning needs to align with his family’s global lifestyle,” explains Tan.

As the needs of UHNW individuals extend to their families and businesses, HSBC’s universal banking model enables the private bank to provide their clients with access to capabilities in Insurance and Asset Management, Commercial Banking and Global Banking and Markets.

These capabilities are increasingly being delivered through a hybrid service model that combines advanced digital platforms with value-added human engagement. This approach, which proved to be especially effective during the pandemic, addresses a broader shift in how clients want to interact with their private bankers.

Committed to Philanthropy
In an environment where wealthy families are increasingly concerned about addressing social issues, HSBC GPB actively supports its clients in their pursuit of driving long-lasting change in their communities.

“As our clients think about their legacy and leaving sufficient resources for their children and grandchildren to enjoy, they are aligning their family business, philanthropy and sustainable investment activities so that they are reflective of the family’s values,” says Spring.

“They want to realise the synergies across all three parts of the family enterprise to amplify the impact of their work. In terms of investments, they are increasingly interested in impact investing.”

HSBC GPB is one of the first international banks in Asia to set up a philanthropy advisory team, which aims to help clients navigate a complex landscape to achieve their philanthropic goals.

A Leader in Succession Planning
As affluent Asian families expand their global reach, their wealth and succession planning needs can also become more complex. HSBC helps clients on this front through their trust business, which was established in 1946.

HSBC Trustee offers clients global coverage in Hong Kong, Singapore, Jersey and the U.S., particularly in Delaware and New York. With constant regulatory changes across jurisdictions, HSBC has the experience and expertise to not only provide best-in-class solutions, but also to ensure wealth structures remain compliant.

HSBC Trustee also creates opportunities for wealthy families by connecting them to other parts of the Group, whether for their everyday banking, credit and investment needs, or to assist them with their wealth structuring planning.

Looking ahead, HSBC GPB is set to continue to expand its capabilities and presence in Asia. HSBC unveiled its new private banking business in Thailand in 2021 and earlier this year launched a differentiated onshore private banking business in mainland China, where HSBC is the largest foreign bank offering comprehensive wealth management solutions. The bank is also looking to India as its next market for the private banking business.

Says Tan: “Capturing the massive opportunity from Asia’s fast-growing wealth creation and what is expected to be among the world’s biggest intergenerational wealth transfer events is core to the HSBC Group’s strategic pivot to Asia, where it aims to be the leading international wealth manager.”

As technology continues to impact busi­nesses and people around the world, inves­tors are trying to understand how these changes will affect their portfolios. The J.P. Morgan Tech Exchange 2022, held earlier this year, explored the changing technol­ogy landscape by bringing together lead­ing experts to present insights on topics ranging from digital assets to the net zero transition.

One of the buzziest areas of interest was the emergence of the virtual world known as the metaverse, a platform that could potentially transform the way we work, live and play. The metaverse has existed in some form for decades, with online gam­ing applications like Second Life in the early 2000s and, more recently, in immersive games that boast hundreds of millions of users and huge supporting economies.

While the definition of the metaverse is still fluid, and likely to be for the foreseeable future, most experts view it as the next, more immersive, version of the internet that replicates elements of the physical world. Many people already see the poten­tial of a new digital economy arising from the metaverse as a platform for users to create, buy and sell goods and services.

According to a J.P. Morgan report, Oppor­tunities in the metaverse,¹ “The key point is that there is no one virtual world but many worlds, which are taking shape to enable people to deepen and extend social inter­actions digitally. This is done by adding an immersive, three-dimensional layer to the web, creating more authentic and natural experiences.”

The report also notes that the metaverse will likely penetrate every sector to some extent in the coming years, with market opportunity estimated at over US$1 trillion in annual revenue.² A number of new tech­nologies have come together to enable this vision of the metaverse, including AR and VR headsets that have become cheaper and more powerful to improve user expe­rience and accessibility.

Meanwhile, blockchain solutions are driving the growth of digital currencies and non-fungible tokens (NFTs) that can facilitate economic transactions virtually. Recognizing the huge potential of the metaverse, J.P. Morgan was one of the first financial institutions to establish their pres­ence in this digital world.

A Fully Immersive Experience

While there is a vague sense of what the metaverse is, there is yet to be a clear con­sensus on what actually makes up this vir­tual realm. In a session at the J.P. Morgan Tech Exchange titled “Game On: The Meta­verse and Web 3.0”, John Riccitiello, Presi­dent and CEO at Unity, shared his views on where he thought this phenomenon was heading.

As head of the world’s leading platform for creating and operating interactive, real-time 3D (RT3D) content, Riccitiello is spearheading the company’s drive to grow RT3D adoption to non-gaming industries, including film and entertainment, architec­ture, construction and automotive.

“I haven’t seen many moments where there’s so much confusion about what something actually is. And part of that confusion is driven by some of the mega-cap companies that are trying to vision the metaverse through their own P&L. And so, they’re explaining the metaverse through the P&L advantage that they see for them­selves,” says Riccitiello.

“The consequence of that is you get some very odd notions out there; that it’s all about avatars and so on, and it’s just not about what so many of them are talking about.”

Riccitiello believes that the metaverse will be comprised of 3D, interactive and fully immersive digital places that will allow you to travel without leaving your home. “Imagine having a million places you can travel to from your living room, and fully immerse yourself in. A place that feels so real that it’s like being there, and you are going to be in the middle of it.”

For instance, consumers will be able to experience “live” concerts in their liv­ing rooms as if they were actually at the venue. “We can now put artists in places where they’re just as tall as you are, and you see them standing on the stage and hear as they perform live. And we can lit­erally increase the audience that can con­sume that live performance exponentially, and make it feel like you’re meters away,” explains Riccitiello.

Boundless Opportunities Across Industries

The economic possibilities and potential of the metaverse have enabled more market opportunities for every sector and indus­try. For instance, consumers with avatars can buy limited-edition, digitally branded clothing that they pick after browsing a vir­tual showroom. Entrepreneurs could start small businesses such as an art gallery to display their collections. And instead of having stores in every city, a major retailer might build a global hub in the metaverse that is able to serve millions of custom­ers. Many retail brands have already been experimenting.

The metaverse will also provide a mas­sive opportunity for business-to-business enterprises. For instance, a manufacturer could test their production line in a virtual environment in the metaverse at a lower cost. Imagine being able to build a com­plex digital twin of a factory, or industrial space, at massive scale, and test how robot­ics systems will interact with the physical environment.

Riccitiello notes that interest in the meta­verse is especially large in Asia: “My sense is this is the right time to make the invest­ments in that market to address the height­ened interest.”

Investing in the Metaverse

While it is still early in the game, oppor­tunities are already emerging for inves­tors to capitalize on the huge potential of the metaverse.

“We think it’s a little bit too early to say who’s going to be the winners out of this. So, when it comes to investing in the meta­verse, we think about the building blocks that will be necessary for the metaverse to be successful, and which companies already have well-established businesses in these areas,” says Cameron Chui, Execu­tive Director and Equity Strategist for J.P. Morgan in Asia.

In particular, Chui highlights different categories of themes that could benefit from the metaverse.

Firstly, the growth of the metaverse is likely to require more processing power, which will in turn increase demand for advanced chips and give a boost to semi­conductor companies. A similar explosion in data that will result from activity in the metaverse will fuel the need for more data center and cloud infrastructure-related companies to house and process this massive volume of data.

Gaming companies that have strong intellectual property or gaming experi­ence will also be well positioned to benefit from the metaverse, as they have experi­ence in creating content that keep users engaged in a particular virtual universe for an extended period of time.

Meanwhile, social media companies have been very successful in fostering interaction between people and giv­ing their users a sense of community, which will be a key part of the metaverse experience. Finally, companies with expe­rience in digital payments will benefit from the commerce that will take place in virtual worlds.

“These are already well-established busi­nesses, and even without the metaverse they will perform perfectly fine,” says Chui. “But if you give them the additional option­ality of the metaverse opportunity as well, this will be a new revenue stream for these companies.”

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 ¹ Opportunities in the metaverse: How businesses can explore the metaverse and navigate the hype vs. reality.
Available at:  https://jpmorgan.com/metaverse Date as of: February 2022.

² Grayscale, November 2021. ‘THE METAVERSE Web 3.0 Virtual Cloud Economies.’
Available at: https://grayscale.com/wp-content/uploads/2021/11/Grayscale_Metaverse_Report_Nov2021.pdf Date as of: July 2022.

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Staking a Claim in the Metaverse

Reflecting its commitment to leading-edge technologies, JPMorgan Chase & Co. maintains a virtual space in the meta­verse known as the Onyx Lounge, which is located at Decentraland.org.

The Onyx Lounge was created by Onyx, a J.P. Morgan business formed in 2020 to build commercial blockchain-based appli­cations, products and infrastructure. J.P. Morgan was motivated to set up the Onyx Lounge by the idea that the metaverse will become a primary channel for com­merce, providing richer, more immersive experiences.

“As a global bank with a leading pay­ments business, offering payments solu­tions in this new paradigm will enable our clients to meet their own customer’s evolving behaviors by providing seamless payment capabilities across traditional and digital currencies,” says Tyrone Lobban, Head of Blockchain Launch & Onyx Digital Assets at J.P. Morgan.

“We also believe that open, interoper­able metaverses will be based on block­chain technology, so there is a natural rea­son for us to participate more deeply given our blockchain expertise and thesis.”

Lobban notes that being an early adopter in the metaverse demonstrates to J.P. Morgan’s clients that Onyx is com­mitted to staying abreast of the emerg­ing trends and committed to finding new ways of doing business based on client demand.

“While it is not clear as to how the meta­verse will evolve, what is clear is that the significant investment in different meta­verse solutions, the attention being paid by large tech companies, the maturing of decentralized blockchain protocols, and the ability for digital assets to create new ownership models with user-centric control, will mean that the metaverse as a concept is almost certainly here to stay—and, in fact, we will probably see special­ized metaverses focused on different domains in time,” he explains.

Earlier this year, J.P. Morgan released its 2022 Summer Reading List in the Onyx Lounge. A summer tradition for more than two decades, this the first time the list has been presented in the metaverse. For a limited time, visitors can use an avatar to explore a curated interactive library exhibit at the lounge, where they can learn about the books and view exclusive interviews with select authors.

Looking ahead, Onyx will continue to explore and participate in multiple meta­verse environments.

J.P. Morgan Tech Exchange 2022

The Seventh Annual J.P. Morgan Tech Exchange brought together a highly impactful group of CEOs and entrepreneurs with the world’s most influential investors for an opportunity to engage in direct dialogue.

“This event has steadily emerged to become one of the most consequential forums on technology investment—and that’s because of the spotlight we put on Asia. It is recognition of Asia’s growing importance as a center of innovation and consumer demand, plus a confirmation that our region is the bedrock of increasingly complex global supply chains. From advanced electronics to semi-conductors, Asia is moving towards the heights of the global value chain,” said Kam Shing Kwang, CEO of J.P. Morgan Private Bank in Asia & Vice Chair of Investment Banking for Greater China at J.P. Morgan, in her welcome remarks.

Some of the illustrious speakers at the event included: Jack Zhang, Co-founder and CEO of Airwallex; Andrew Forrest, Chairman and Founder of Fortescue Metals Group and Fortescue Future Industries; and Robert M. Gates, the 22^nd U.S. Secretary of Defense.

Participants were also able to explore the latest developments in the tech world through a virtual showcase at the event.

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