By Jeffrey Hodgson and Saeed Azhar
SINGAPORE (Reuters) - Citigroup Inc's private banking arm is warning wealthy Asian clients that emerging markets are likely to suffer further losses in coming months, particularly in countries where political uncertainty is high.
The firm is urging clients to favor defensive sectors like healthcare, utilities and infrastructure, as well as keeping their holdings diversified, said Jennifer Tay, Asia-Pacific head of portfolio counseling for Citi Private Bank.
"For the next few months, anything that is emerging markets oriented, they would have a further beating, that is what we anticipate," she told the Reuters Wealth Management Summit in Singapore.
"It doesn't help that the geo-political situation in this area is also not great, Thailand and the situation there and Russia for example."
The Singapore-based executive noted many emerging markets have heavy exposure to beaten-down commodity prices and that corporate failures are likely to increase across Asia as the global financial crisis, and its impact on access to credit, drives weaker firms to insolvency.
Asian and emerging markets and value-oriented funds have been the two worst recommendations the bank has made to clients in the past year, she said, adding one of its best call was to encourage them to cut commodity exposure about 4 months ago.
DASH TO CASH
Citi's Asia Pacific wealth management unit, which includes Citi Private Bank, helps oversee more than $300 billion in assets. The private bank focuses on clients with a net worth of at least $10 million.
Tay said these clients, many of them self-made Asian entrepreneurs, have not been immune to the fear and panic that have gutted financial markets as investors react to the greatest financial crisis since the Great Depression.
She said the portfolios of clients who took a diversified approach were probably down about 10-15 percent this year. Clients who invested more aggressively in asset classes like currencies or in commodities only have fared worse.
In many cases they are now fleeing equities, commodities and currency bets, intent on preserving capital even at the risk of forfeiting yield.
"They are moving more into cash, partly to meet margin calls and partly they are afraid of what's going to happen moving forward. So we have seen a lot of clients moving money into cash, near cash," she said.
"Even deposits are questioned as to which institutions are actually guaranteeing the deposits. So that's post-Lehman and post-AIG."
She said much of that capital has gone into safe-haven U.S. Treasuries. Some clients had also put money into debt and preferred shares issues by Singapore's DBS Group, United Overseas Bank and Oversea-Chinese Banking Corp
"They are still quite keen on the Singapore banks. They still view them as too big to fail or backed by the Singapore government to some extent," she said. Continued...
© Thomson Reuters 2009. All rights reserved.
| Health | Nov 09 - 12, 2009 | Health |
| Autos | Nov 02 - 4, 2009 | Autos |
| Middle East Investment | Oct 26 - 28, 2009 | Country Summits |
| Washington | Oct 19 - 21, 2009 | Country Summits |
| Global Wealth Management | Oct 05 - 7, 2009 | Financial Services / Exchanges |
