The rapid growth of Asia’s billionaires in terms of number and wealth will benefit capital markets and investment banking business, according to UBS.
Asia’s billionaire wealth surged nearly 13% to $1.2 trillion during the past year, with the highest percentage rise of billionaire population across the world at 3.7%, according to a census released by Wealth-X and UBS on Wednesday.
The region will also overtake the US in the next five years in terms of number of billionaires, the census said.
Bankers believe that participation in capital markets, including IPOs, recapitalisations and M&A deals, will surge if more wealthy families and their enterprises become stronger and more profitable.
“If you believe that wealth is going to accumulate in larger individual pools of capital, then that is [likely] to give rise to not just private bank opportunities but [also] investment bank opportunities,” said Matthew Hanning, joint head of investment banking Asia with UBS.
Asia's billionaires participate in capital markets but - like other investors - are prone to be cautious when the capital markets get in trouble or market uncertainty heightens, bankers said.
Take the Hong Kong IPO market, for example. During the past two years, very few billionaires have taken part given market volatility, which has dented the appetite for investment. However, as the market has returned to health for new share listings in recent months, billionaires have again participated in IPOs.
In the latest deal - Huishang Bank’s $1.19bn IPO - Hong Kong tycoon Cheng Yu Tung and mainland billionaire Wang Shi’s Vanke bought $27 million and $400 million as cornerstones, respectively.
Another change for Asian billionaires that could lead to more involvement in the capital markets is the increasing professionalisation of their wealth management.
“Sometimes they [Hong Kong’s wealthy families] think themselves as institutional-type investors in the region,” said Amy Lo, head of ultra high net worth Asia-Pacific with UBS.
One family has an investment office that has 50-60 professionals with Chartered Financial Analysts (CFA), and about 30 of them are looking for direct investment deals, similar to private equity deals, in the market, according to Lo.
Investment banks have set up internal joint venture scheme with investment banking and wealth management and tried to deliver more value for the wealth.