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Asia's rich chase dollar rally as volatility haven
[SINGAPORE] Asia's wealthiest families are snapping up dollars as a haven from the volatility plaguing financial markets, providing another source of demand for the greenback.
Rich individuals are chasing the greenback's rally to a decade-high as the US prepares to raise interest rates for the first time since 2006.
Stamford Management Pte in Singapore, which oversees US$200 million for Asia's multi-millionaires, says about 90 per cent of its holdings are now in the US currency.
SandAire Ltd and Woodside Holdings Investment Management have boosted dollar assets to the maximum their rules allow.
"The US dollar has moved relatively quickly, and that left a lot of high-net-worths behind," Jason Wang, Stamford's Singapore-based chief executive officer, said on Wednesday in an interview.
"Non-professional investors are not usually the first movers or innovators of a major trend, so there's still a lot of pent-up demand."
Markets are becoming more dangerous, particularly for smaller investors, as geopolitical turmoil from the Middle East to Ukraine combines with surprise policy announcements in the euro region, Switzerland, Singapore and Canada, to stoke price swings.
With the US economy outperforming its developed-world peers, the dollar is increasingly viewed as the best antidote to the increase in risk.
Larger investors have known this for months. Hedge funds and other major speculators pushed net wagers on a stronger dollar to a record 448,675 contracts in the week ending Jan 13, according to the Commodity Futures Trading Commission in Washington. They fell back to 437,873 last week, the first decline since mid-December.
Asia's importance to the global economy is increasing, with the region's developing nations accounting for 39 per cent of global growth last year, compared with the European Union's 30 per cent and 22 per cent for the US, according to the International Monetary Fund. The proceeds of that growth are increasingly being plowed into dollar-denominated assets.
Stamford, Woodside and SandAire are what's known as family offices, established to manage the wealth of one or more rich families, rather than the companies or banks served by larger institutional investors.
SandAire, which has offices in London and Singapore, was set up in 1996 to oversee the investments of UK businessman Alex Scott and his family after he sold two family businesses. It's seeking to limit its exposure to currencies including the euro, pound and yen.
"We're currently positioned for continued dollar strength, though we'd be surprised if it's all one way," Andrew White, a portfolio manager at SandAire in Singapore, said on Wednesday in an interview.
Individual investors in Asia tend to be more proactive in managing their money than their counterparts in Europe and the US because they're more focused on generating short-term gains, according to Noor Quek, who runs Singapore-based family- office adviser NQ International Pte.
Bloomberg's Dollar Spot Index, which tracks the US currency against the euro, yen and eight others, touched its highest level this week since the measure started in 2004.
The currency's gains are being driven by speculation the Federal Reserve will soon raise its main interest rate from the zero to 0.25 per cent range it's been in since 2008.
Europe, Japan The boost to the dollar is amplified by the European Central Bank and Bank of Japan's efforts to increase the money supply in their own economies. The ECB surprised investors last week with the scope of its 1.1 trillion-euro (US$1.2 trillion) quantitative-easing program, sending its currency to an 11-year low of US$1.1098 on Jan 26. It was at US$1.1300 as of 7:40am in London on Thursday.
Canada and Norway enacted shock rate cuts this month, while Switzerland removed its currency ceiling on Jan 15, pushing an index of currency volatility to a 1 1/2-year high and sending investors piling into the dollar for safety.
Singapore's central bank on Wednesday eased monetary policy in an unscheduled decision to reduce the pace of gains in the city state's dollar versus a basket of currencies.
The greenback has risen versus its peers for seven consecutive months. Fifty-four per cent of investors, analysts and traders in a Bloomberg Global Poll this month picked the US as the market likely to offer the best opportunities in the next year.
While Woodside in Singapore has put almost all its cash into dollars, the greenback is less attractive these days because recent gains have made it expensive, said Chief Investment Officer David Fergusson.
Choosing whether to buy the dollar is like deciding "if you'd rather be shot in the head or leg," Mr Fergusson said in an interview.
"You don't really want to be shot at all, but given that you have to be shot somewhere, I'll take the leg."
Woodside was set up in 1959 by Mr Fergusson's late grandfather. About 80 per cent of its liquid assets are now denominated in dollars, compared with 50 per cent at the start of last year.
Stamford, whose clients must have at least US$2 million in net investable assets, started switching its assets into the US currency from Singapore dollars in 2013.
Mr Wang said he's not worried about a pullback in the greenback's rally.
"We're happy to sit on our long-US dollar position for the next three to five years," he said. "We're just enjoying the momentum."