Asia's Thriving Economies Beckon Western Companies

The boom in the economies of many Asian countries is creating opportunities for Western financial firms that hardly existed a decade ago, according to two keynote speakers at the recent Wharton Asia Business Conference.

Thanks to their double-digit growth, the developing Asian economies, led by China and India, are minting new millionaires seeking managers for their money, said Renato de Guzman, CEO, ING (ING Quote - Cramer on ING - Stock Picks) Private Bank-Asia. They are also giving birth to new firms that are seeking merger and acquisition advice as they expand at home and abroad, added Helge Weiner-Trapness, a managing director in Asia with JP Morgan (JPM Quote - Cramer on JPM - Stock Picks).

"Asia is a great opportunity for the simple reason that the rate of growth in the number of high-net-worth individuals is higher than in the rest of the world," de Guzman said. The economies are expanding "at above average rates and should continue to do so, and the regional currencies are appreciating against the dollar. So the outlook remains positive."

Burgeoning economies translate to swelling bank accounts. According to a report by Merrill Lynch (MER Quote - Cramer on MER - Stock Picks) and Capgemini (CAP Quote - Cramer on CAP - Stock Picks), the number of people in the Asia-Pacific region with $1 million or more in assets , excluding their homes, rose 8.6% in 2006, reaching 2.6 million.

Asians also tend to save more than their Western counterparts, enabling them to invest a greater share of their incomes. At the same time, countries like China and India are relaxing legal restrictions on where their citizens can invest, increasing the pool of available assets. China, for example, is experimenting with letting people invest in Hong Kong's financial markets, de Guzman said.

His company, a division of the Dutch banking giant, specializes in catering to the newly rich in Asia. He has found that ING's new clients in the region exhibit different characteristics from those in the U.S., Europe and the Middle East. "It's a young, entrepreneurial population," he noted. "They tend to be risk takers because they have built their own companies. So they want portfolio performance as opposed to wealth preservation."

They also tend to be more drawn to debt than clients in the developed world and Middle East. "In Switzerland, a rich person will say, 'I'm rich. I don't need any loans,' " de Guzman said. "But in Asia, he will say, 'If you don't give me loans, I won't bank with you.'" ING has been able to roll out products that combine features of debt and investment products, such as loans that the borrower then uses to buy life insurance.

ING has chosen to organize its Asia private bank differently, too. "The traditional Swiss model of private banking emphasizes service and confidentiality," de Guzman noted. "But that doesn't contribute to performance and is less valued among the newly wealthy in Asia. And the American brokerage model tends to emphasize equities instead of total wealth management. In the Middle East, you will see more of a European model, with more family offices and professional managers handling the money."

To deliver the higher returns that Asian clients seek, ING's Asia private bank offers a more aggressive asset mix. "The traditional model is cash, investment-grade fixed-income securities and equities," de Guzman said. "But in Asia, we're using high-grade and high-yielding fixed-income assets as well as alterative investments like venture capital ." Some firms, he added, offer the same sorts of money management products to both individuals and institutions as they try to attract Asian clients. He said he regards that as a mistake. "The private banking client has a shorter time horizon and cares more about absolute performance."

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