TOKYO/BENGALURU -- Wealthy Asians have long viewed the U.S. as a top destination for investing their capital, at least until President Donald Trump started imposing harsh tariffs on trading partners and challenging the Federal Reserve's independence.
The U.S.'s economic growth, political stability and strong relationships with allies have helped the country attract capital from around the world. Three months into Trump's second term, however, the president is raising the odds that America will head into a recession. It is being pushed in that direction by the massive tariffs Trump is using to tame trading partners to his liking and, more alarmingly, to shake up the post-World War II international order.
Ultra-high-net-worth Asian investors are uneasy about the current bout of uncertainty, which is threatening to dent confidence in the world's largest economy, according to private bankers and wealth managers.
Hideyuki Watarai, CEO of the Tokyo-based advisory Family Office Design, said some of his clients are concerned about the U.S. "on a much bigger scale" than they are about Japan, a big exporter to the U.S. and Trump target. He said his clients include founding families of listed and unlisted companies as well as property tycoons, each with assets worth anywhere from a few tens of millions of dollars to hundreds of millions of dollars.
"Some are concerned that the era of neoliberalism and free trade, where capitalism flourished, has come to an end due to the emergence of protectionism and patriotism," he said.
Last week, Trump's trade war and a fresh round of attacks on the Federal Reserve shook investor confidence. Although U.S. stocks rose last week after Trump dialed back his rhetoric, the S&P 500 is still down 10% from its record high close on Feb. 19. Putting investors on edge, 10-year U.S. Treasury yields rose as high as 4.59% on April 11 even as the dollar lost value.
The International Monetary Fund has lowered its global growth forecast for this year to 2.8% from 3.3%, which would be the slowest expansion since the COVID-19 pandemic, according to a press release issued Tuesday.
Asia is home to four of the top 10 countries with the greatest number of ultra-high-net-worth individuals, defined as those with a net worth of more than $30 million, according to data from Wealth-X, an Altrata company. China leads the pack with around 46,000 individuals, followed by Japan (16,565), Hong Kong (12,545) and India (9,540), the data shows.
To concerned clients, Ulysses Lau, head of investments and engagement for Asia at J.P. Morgan Private Bank in Hong Kong, said he has been emphasizing the importance of maintaining a "strategic asset allocation." This consists of "equities for capital appreciation, fixed income for resilience, and tactical opportunistic themes," he said.
The owners of private companies or those who have sold their businesses are the most concerned about their portfolios, said Kazumi "Kate" Ogaki, general manager at Tokyo-based Aoyama Financial Service.
They are primarily the ones "voicing concerns and raising questions on whether they should change asset classes," out of equities, Ogaki said. Japanese investors have long preferred U.S. equities over domestic ones.
Ogaki said her clients mainly consist of the second and third generations of the founding families of large and midsize listed companies. She added that many of her clients' portfolios include shares in their own companies and real estate in and outside Japan.
Some investors are reassessing how much exposure they want to have in U.S. capital markets and the dollar, said Tommy Leung, head of global private banking for South Asia at HSBC in Singapore. A "small number of more leveraged clients have trimmed exposure or deleveraged, particularly from U.S. equities," he said.
Among ultra-high-net-worth individuals, hedging activity has picked up, particularly to cut foreign exchange exposure to future uncertainty in global trade and investment flows, Leung said.
"Compared to previous market downturns, clients' behavior this time appears more measured," Leung said. "There's a shift away from concentrated bets in single markets or themes. Instead, they've positioned for resilience."
In India, high-net-worth individuals have not yet changed their holdings of domestic assets, but they have adjusted their international investments, said Shravan Kumar Sreenivasula, executive director of investment solutions at Avendus Wealth Management. Headquartered in Mumbai, Avendus manages around $7 billion in assets. Its clients include ultra-high-net-worth individuals, family offices and corporates.
"We have seen clients pull away money from the U.S. as sizeable returns have been made in the last two to three years," Sreenivasula said. At the same time, Indian equities are offering an attractive opportunity, he said. The benchmark Nifty 50 index has rebounded over the past couple of sessions, thanks to the country's domestic consumption-driven economy and its low dependence on exports.
For some, the dip in U.S. equities offers an opportunity to buy. "We see some clients exploring an increase in equity exposure via structured products and adding protection through buffered structures," said Lau of J.P. Morgan Private Bank.
With the general exception of U.S. Treasurys, traditional haven assets have surged in demand.
Gold on April 21 hit a record of $3,500.05 an ounce on Monday. "Gold is a hedge and may rise as central banks and investors diversify away from U.S. Treasurys," Lau said.
The Hong Kong private banker added that investors are considering shifting to the euro and yen, and that there is a "noticeable trend" toward exploring alternative investments. The yen surged to the 139-level, hitting a fresh seven-month high last week.
As wealthy Asian investors try to figure out how best to position themselves, they are unlikely to hit on a clear-cut solution. "The fact of the matter," Family Office Design's Watarai said, "is that currently there is no currency that can be an alternative to the U.S. dollar."
