HK-Based Offshore Investors To Favour Assets With Foreign Currency Exposure - Study

Vanessa Doctor

13 January 2011

Investment products exposed to foreign currencies will likely hold the most demand among offshore clients in Hong Kong in two years time, Datamonitor predicts in its latest study.

Titled "Offshore Financial Services in Hong Kong 2010," the research reveals that more than services or credit, foreign currency-linked investments will create opportunities to generate return, albeit with greater risk, given volatile international currency market conditions. In addition to these, Datamonitor wrote that areas that might also be popular among offshore investors would be direct equity investments and deposit and savings accounts.

"High net worth individuals have an important desire to protect their existing wealth, which may be tied up in formerly strong currencies, from depreciation and loss of buying power through hedging," Andrew Haslip, senior analyst at the firm, said.

"Offshore clients are more exposed to the potential of losses due to swings in currencies. Therefore, banks catering to this base must provide the tools to mitigate the risk and, indeed, profit from it," he added.

The study cautioned that banks seeking to cater to the offshore client base must still offer a holistic package that includes more mundane deposit and savings accounts with competitive rates. This setup, the research noted, will provide the risk averse clients a place to invest while still leaving opportunities open for those who are interested in exotic investments.