Although geopolitics has always been a looming concern for private banks, the Ukraine war and China-US tensions have pushed such concerns to the fore.

During Asian Private Banker‘s 10th Fund Selection Nexus 2023 Singapore, private bank fund selectors shared their insights on capturing opportunities in the environment of rising geopolitical risk during the panel discussion: Navigating market volatility, emerging trends and geopolitical risks across APAC.

Business as usual

Prashant Bhayani, BNP Paribas Wealth Management

Political tensions have always had an impact, but markets will adapt and get used to these conflicts, argued Prashant Bhayani, chief investment officer, Asia, BNP Paribas Wealth Management,

Bhayani said is happy to take risks, as he thinks markets are reacting rationally and will become more manageable.

Investments in Asia markets are becoming more favourable, he said, adding that the rebound in Korea and Taiwan has added to his faith in the situation.

Yankai Shao, Lombard Odier Group

Yankai Shao, head of investment solutions, Asia, Lombard Odier Group, believes ASEAN markets are able to capitalise on the ongoing geopolitical tensions as the globe gradually shifts to a more regional model, leading to big medium-term changes in the supply chain.

For instance, Indonesia has half the world’s nickel reserves and its president is looking to further the value chain; and multinationals in Taiwan, Japan, and Korea that are part of the technology, industrial re-export sector might benefit from the change too, Shao explained.

Is China still investable? 

James Cheo, Global Private Banking and Wealth, HSBC

James Cheo, managing director, chief investment officer, Southeast Asia & India, Global Private Banking and Wealth, HSBC, thinks the growing importance of China over the past decade has now changed due to demographics, debt, and deglobalisation.

Cheo explained this has affected how he thinks about portfolios in the years ahead. Previously, his focus was on investments, infrastructure, and debt. Going forward, he thinks it would be more tricky as China’s business model is shifting to be more consumption and innovation-based since it is moving up the value chain. To that end, Cheo identified a need to hunt for opportunities in other markets.

“I think investors cannot ignore ASEAN and India, I give the term AI, not artificial intelligence, but ASEAN and India,” said Cheo.

Stefanie Holtze-Jen, Deutsche Bank

Stefanie Holtze-Jen, chief investment officer & head of discretionary portfolio management APAC, Deutsche Bank, pointed out that while China needs to be well diversified, its flip side should be identified too. However, she believes that more stimulus is needed for the current sour market sentiment to fade.

Bhayani added that investing in European companies, such as luxury goods and multinational industrials, is another alternative way to benefit from China’s growth. He also noted China is transforming into a big EV powerhouse. Yet, he is aware of the geopolitical tensions still in the area.

“They look at China separately, doesn’t mean they’re not investing in China and their opportunities, their domestic tourism, etc. But you need to be careful on the regulatory side,” said Bhayani.

Shao holds a neutral view on China equities as he is waiting for better timing and stimulus from the Chinese government to become overweight.

Potential Japanese FX dip 

Cheo noted as the best part of Japan’s market rally is over, he sees a consolidation pattern and the risk lies in BOJ’s policy, in which the divergence policy caused the yen to depreciate.

Holtze-Jen is waiting for the market to dip and then invest, as she identifies the merits of the Japanese market in the medium and long term, and is convinced that the dip will come on the currency side. She forecasts the yen growth will shave off 3% of the earnings growth that is projected currently.

“And I hope that on the back of this, we will also see a meaningful equity correction that allows me to go back into the equities space, that I have admittedly missed a big part of the rally,” said Holtze-Jen.