Rich have their eye on structured financial products

By Cai Xiao (China Daily) Updated: 2014-10-15 09:23

Structured products will be the most popular financial instrument, and the United States will be the investment destination of choice for China's wealthy in the coming 12 months, according to a report co-released by Julius Baer Group and Bank of China Co Ltd on Tuesday.

A structured product is commonly defined as a prepackaged investment strategy based on derivatives, such as a single security or securities, a basket of stocks, options, commodities, debt issuance or foreign currencies.

In June, a survey was conducted, fielding 200 responses from Bank of China private banking's client base, in the form of face-to-face interviews. Their locations ranged from large metropolitan centers like Beijing, Shanghai and Shenzhen, to the central economic hub of Chongqing, to the western province of Qinghai.

The bulk of respondents were entrepreneurs. The average age was 45, and there appeared to be an even split between men and women.

In terms of the asset classes, structured products, funds and real estate were the three most popular vehicles among the respondents. Equities outside the Chinese mainland ranked toward the bottom, alongside commodities, private equity and futures.

"In terms of the coming 12 months, respondents reaffirmed their interest in structured products but indicated less interest in property," said Sun Yan, chief representative of the Shanghai office of Julius Baer, a leading Swiss private banking group, which conducted the survey.

"They also indicated a greater interest in foreign exchange and some further reservations regarding local stocks," said Sun.

In terms of cross-border investing, 44 percent of survey respondents expressed an interest in buying real estate outside the Chinese mainland in the coming year, the survey said.

As for investment destinations, they overwhelmingly expressed interest in the United States, followed by Hong Kong, Australia and Europe, said the report.

As of June, respondents saw long-term value in gold as a safe haven asset but had limited expectations of appreciation in the shorter term. By the same token, real estate remained a preferred long-term investment, alongside art and antiques.

According to the report of Julius Baer and the Bank of China, the renminbi's ongoing internationalization will likely culminate in both full convertibility and reserve currency status in the medium term.

A report by Credit Suisse Group AG, also published on Tuesday, said that global private wealth will grow 40 percent to $369 trillion by 2019, with more than one quarter of the growth coming from emerging markets.

The share of global wealth from emerging markets will advance over the next five years to more than one-fifth, as millionaires almost double in China and increase more than 50 percent in countries such as India, Indonesia and Mexico, Credit Suisse reported.

The US will remain the most affluent country with more than $114.5 trillion in 2019, compared with $83.7 trillion this year, according to the report. China is predicted to leapfrog Japan into second place by 2019.