Hong Kong is one of the hottest wealth markets for private banks. Many are fearful of getting caught in the cross-hairs of widespread protests in the territory.
Hong Kong - home to 500,000 US dollar millionaires – is going through what one tycoon calls «[it’s] toughest period since SARS,» referring to the time the virus arrived in Hong Kong in 2003 and decimated investor confidence.
At the time, those with both money and gumption had snapped up super-prime real estate in the Central Business District and shopping hub of Causeway Bay. When the epidemic finally passed, it left behind an explosion of newly-minted millionaires and a few global banks scrambling to service them.
«Those were the boom years for the likes of UBS,» says one veteran banker who remembers global banks hoovering up assets with the promise of relative safety offshore.
Different This Time?
The air of uncertainty is as palpable today as it was then, but the similarity ends there. After months of protests – including by bankers – the number of property transactions fell 48 percent. The uber-wealthy (those buying properties worth $10 million or more) are choosing to forgo deposits rather than close deals.
Global banks, on their part, are reticent to appear to profit from the political and economic uncertainty.
«We will see a contraction in the industry this year not because of market forces but because aggression levels are nowhere like they used to be,» says the veteran banker. But with more tools to diversify assets than ever before, why are banks staying away from rather than wooing clients?
Stakes Too High
«The Swiss banks are too scared,» says a Hong Kong-tycoon who has been a regular and trusted source for many years. Large investments towards onshore licenses and platforms make them particularly vulnerable to Beijing he reckons.
Banks were seen as supportive of the region when they expanded marketing efforts during and after SARS, but profiting from this round of instability would be unseemly. «The stakes are too high» is all one Swiss banker will say on the matter.
For banks like UBS, the stakes may be even higher with offices that dominate the skylines. Other banks with major exposure to the region – such as HSBC and Standard Chartered – have tried hard to straddle the divide with full-page ads asking for a peaceful resolution.
Caught In Crossfire
«No bank wants to be caught in the crossfire again,» says the banker who stops short of mentioning HSBC’s recent snafu that reportedly earned it the Chinese authorities’ ire for its involvement with Huawei. «[T]here are many factors to consider» and banks have chosen to sit out this round rather than navigate such tricky waters.
«I used to say, when a family or a nation are divided the only ones to profit are the banks,» says the tycoon. «The Swiss banks, in particular, found a way to make money on both sides of a coup,» he says, only half-joking. «But this time around, they are retreating from the crisis instead of running towards it.»
