Ultra-wealthy prefer to invest in stocks, properties

(From left) Knight Frank head of research for Asia Pacific Nicholas Holt, Knight Frank Malaysia executive director James Buckley and Knight Frank Malaysia associate director international project marketing Dominic Heaton-Watson.

By SHAREN KAUR - April 12, 2018 @ 1:47pm

Despite the increasing popularity of cryptocurrencies such as Bitcoin, the ultra-wealthy around the world still prefer parking their money in stocks and properties, according to Knight Frank head of research for Asia Pacific Nicholas Holt.

The biggest draw for new investments by the wealthy last year was equities.

As stock markets around the globe soared, the appetite for shares was greatest in Asia. Beating the global average by 21 per cent, 83 per cent of Asian respondents said their clients increased their exposure to equities last year.

According to the latest Wealth Report 2018 by Knight Frank, 43 per cent of Malaysian clients planned to invest in properties overseas. Malaysia topped the list in terms of those looking to invest abroad, followed by Hong Kong (40 per cent), China (37 per cent) and Singapore (30 per cent). 

Holt said the level of investors in Malaysia investing abroad had been relatively stable over the years, adding that a similar trend could be expected over the next few years.

“It should be stable, going forward. With the current property glut and wait-and-see approach adopted by investors, it is certainly a driver to continue investing abroad.”

Knight Frank Malaysia executive director James Buckley said Malaysian investors were increasingly looking to invest in mature markets like the United Kingdom, Australia and Singapore.

The three countries were above the global average of 34 per cent when considering overseas purchases, according to the report.

The report said the other two top overseas destinations for Malaysian investors this year were the United States and New Zealand.

Besides looking at traditional property sectors such as residential, office, retail and hotels, Malaysian investors are also diversifying into purpose-built student accommodation.

Student accommodation over the last five years had been the star performer for UK property, he said.

“Increasing student numbers and a structural undersupply have driven rental growth and occupancy. Education is less correlated to the health of the general economy, which investors are also attracted to,” he said at the launch of the Wealth Report.

Knight Frank Malaysia associate director international project marketing Dominic Heaton-Watson said for the London market, Malaysians were targeting city fringe locations that had connectivity and linked to rail, as well as high-yield assets in east London.

“Malaysians are investing in London for a few reasons. They are looking at prime site assets that offer high yields and capital appreciation. They are also looking at investment portfolio diversification,” he said.

Heaton-Watson said despite the ongoing Brexit negotiations, London still ranked No. 2 in the future economic performance category.

“This is due in part to the impressive growth of the creative and tech sectors, as well as large-scale infrastructure investment, such as Crossrail.”

Other investment tools

According to Knight Frank’s The Wealth Report Attitudes Survey 2018, 28 per cent of Asians list wine, jewellery, watches or classic cars as part of their investment portfolio, below the global average of 37 per cent.

Cryptocurrencies are included in the survey for the first time as an asset class within the investment portfolio. Malaysians respondents were most optimistic about increasing the amount of cryptocurrencies held in their portfolios, with 21 per cent of respondents saying they planned to increase its weight.

“While dominating the headlines over the last 12 months, awareness of what impact Blockchain could have on wealth portfolios remains fairly low in the Asia Pacific. In terms of real estate, the potential of making transactions simpler and more straightforward via Blockchain technology, while a future possibility is not currently being seriously considered by most surveyed,” said Holt.

Surprisingly, gold had lost some of its glitter as an investment for most of Asia: only China and Malaysia saw significant reallocation into the precious metal with 46 and 33 per cent of respondents saying their clients increased allocations last year, above the global average of 25 per cent.

Knight Frank Malaysia managing director Sarkunan Subramaniam said wealthy investors in Malaysia notably increased their exposure to bonds and gold last year as they were seen as safe-asset classes in light of this year being an election year.

“Post-election, we expect investors to accept more risks as the political landscape brings a new policy and economic cycle. Investors may also increasingly look at various real-estate opportunities across residential and commercial properties both at home and overseas,” he said in a statement.

The Wealth Report by Knight Frank, an annual snapshot of the issues influencing wealthy individuals’ investment and lifestyle decisions, was based on the response of 541 of the world’s leading private bankers and wealth advisers, representing roughly 50,000 clients with a combined wealth of around US$3 trillion (RM11.62 trillion).

According to Wealth X data for The Wealth Report, the number of ultra-wealthy individuals with net assets of US$50 million and above -rose by 10 per cent last year, equivalent to 11,630 individuals, taking the global population to 129,730.

Asia has overtaken Europe in absolute numbers of ultra-wealthy individuals. As at end of last year, Asia boasted 35,880 ultra-wealthy individuals, compared with 35,180 in Europe.

For the Asian market, Malaysia ranks sixth in terms of country level wealth distribution of ultra-wealthy. Malaysia is forecast to contribute 65 per cent of the growth of Asia’s new ultra-wealthy individuals by 2022.