Interest rates, China and sustainability are among the topics that will be top of mind for private bankers in the region next year, according to leading CEOs who took part in Asian Private Banker’s Final Word 2023.

The year in review project, which collects the insights and views of private banking and wealth management leaders, covers trends ranging from investments, to hiring, to technology. Participants, which include top CEOs and CIOs, also lay out their predictions for 2024.

Click here to access Final Word 2023.

Below, we outline five important takeaways.

Counterparty risk is key

Notwithstanding macro and market challenges, Vincent Chui, head of Morgan Stanley Private Wealth Management Asia, believes counterparty risk was a key consideration for private banking clients in 2023. Against a backdrop of the US’s regional banking liquidity crisis and UBS’s acquisition of Credit Suisse, there was liquidity migration to global banks that offered relatively high interest rates. This led to strong net interest margin revenues, offsetting slower flow product and fees revenues, Chui added.

Those sentiments resonated with Vinay Gandhi, global head of South Asian community and regional head of Africa, Middle East and Europe, private banking, at Standard Chartered. “As a universal bank, our business stands to benefit from both strong markets and high-rate environments.”

Where to invest in 2024?

After challenging market periods in 2022 and 2023, private banks are looking forward to a hopefully more conducive investing environment in 2024. Much of that will depend on the velocity at which interest rates come down, while there are also potential pitfalls.

“2024 could present challenges including central bank policy transition, global growth slowdown and geopolitical uncertainty. These risk factors may result in heightened market volatility and create dispersion between markets, offering opportunities for nimble investors,” said Siew Meng Tan, regional head of HSBC Global Private Banking, Asia Pacific.

Among the other trends that leading private banks will be focusing on in 2024 are private markets, artificial intelligence, high quality bonds, and sustainable investments.

However, there are also geopolitical risks, including the 2024 US presidential election which could pit incumbent Joe Biden against former White House occupant Donald Trump.

“The new landscape will also bring associated risks, not least the continuation of kinetic wars and shifting regional power structures. However, the biggest unanticipated risks for 2024 are a return to 2016-style political disorder and stagflation,” added Michael Blake, Asia CEO at UBP.

China remains key with China 3.0

China’s slowing economy – underscored by lacklustre equity and real estate markets – is also a headache for private bankers up and down the region

But on the back of monetary and fiscal stimulus measures, Marco Pagliara, head of emerging markets at Deutsche Bank Private Bank, thinks the Chinese economy has already shown signs of improvement in recent months.

Amy Lo, chairman UBS Global Wealth Management Asia and co-head UBS Global Wealth Management APAC, believes that China still presents compelling investment opportunities for investors.

“A space to watch in 2024 is China 3.0. The economy transitions to a new-world trinity of mass consumption, the green transition, and tech innovation. But the rebalancing is not easy,” said Lo.

Identifying new opportunities with sustainable investing

Jin Yee Young, co-head UBS Global Wealth Management APAC, pointed out that sustainable investing is not only about thematic opportunities, but a way to identify well-run companies across industries that are prepared to address changing stakeholder expectations.

Meanwhile, Bank of Singapore has combined ESG risk analysis with bottom-up fundamental, relative valuation analysis and top-down macro assessment to create a research framework to identify investment opportunities with manageable climate risks and good relative value.

“We also consider the potential impact of climate change on selected high-risk sectors and assess if environmental challenges may lead to the deterioration of credit quality and whether there are any existing mitigating factors,” said Jean Chia, CIO.

Wealth transfer driving Asia DPM

Finally, bankers expect faster adoption of discretionary portfolio management (DPM) in the region going forward.

Jimmy Lee, head of Asia at Julius Baer, points to insights from past cycles, diminishing information advantages, and a wealth transfer to a delegation-inclined younger generation as reasons for rising adoption.

“Whilst DPM penetration in Asia is indeed still lagging behind other regions, there is a noticeable increase in uptake going on,” add Omar Shokur, CEO, Asia, Indosuez Wealth Management.

“They [the younger generation] are much more open to delegated solutions such as DPM and other mandates such as private equity. We are pleased to be well-positioned for this growth,” said Shokur.