Warming to stocks and shares

Published October 14, 2011

PRIVATE BANKING


Outlook for property challenging in 2012 and 2013: Merrill


By GENEVIEVE CUA


(SINGAPORE) Wealthy individuals in the Asia-Pacific region are expected to trim their exposures to real estate and invest more in equities next year.


A surge in property prices in 2010 helped to boost the wealth of high net worth individuals in Asia, led by Singapore and Hong Kong, according to the Asia Pacific Wealth Report by Merrill Lynch Global Wealth Management and Capgemini.

The outlook for 2012 is not as robust, however. 'We expect an oversupply of private housing between now and 2015 (in Singapore),' said Melvyn Boey, managing director and head of Asean equity research at Merrill Lynch Global Wealth Management.

The firm is expecting a 'challenging' outlook for 2012 and 2013, and has forecast a 7.5 per cent decline in Singapore home prices in 2012 and another 10 per cent fall in 2013.

In 2010, the wealthy in the Asia-Pacific area invested some 26 per cent of their portfolios in equities and 27 per cent in property. Allocations to real estate are expected to fall to 20 per cent, and equities' share of investments to rise to 31 per cent.

For now, clients have turned cautious on equities, said Mr Boey.

'As we move to end-October, things may slow. The question is whether we're in (a situation similar to) April 2009, or is there another leg down. Our base case is it will be difficult for Europe to come to a conclusion (to its debt problems) - not impossible, but difficult.

'At this point people will be more cautious as they think about their equity allocations.'

Merrill's base case for global growth is 'a slowdown, not a hard landing', said Mr Boey. 'We expect the US to slow to 1.8 per cent, and Europe to 0.8 per cent, but not the financial turmoil of 2008.'

Asia Pacific's GDP growth is forecast to slow to 6.9 per cent in 2011 and 6.8 per cent in 2012.

Meanwhile, when it comes to passion investments, the wealthy in the region had marginally the highest allocation to luxury collectibles at 30 per cent, compared to the global average of 29 per cent in 2010.

This segment includes luxury cars, jets and yachts. They also had the largest allocation to jewellery, gems and watches at 24 per cent compared to the global average of 22 per cent.

In the segment of passion investments, Singaporeans' appetite for jewellery, gems and watches was the highest in the region with an allocation of 41 per cent. Allocations elsewhere into this segment ranged between 15 per cent in Australia and 37 per cent in India.