JAKARTA - Tensions in the Gulf region have prompted wealthy families and company founders to rearrange their capital placement. Singapore and Hong Kong are starting to be seen as the main destinations, although this movement does not mean that all assets leave the Middle East.
China Daily, quoted Thursday, July 16, said that a number of wealthy individuals have begun exploring the placement of some of their assets in other financial centers in Asia. Singapore is the most frequently mentioned choice.
The move comes despite Iran and the United States reaching a tentative deal last month. The renewed attacks have investors seeing the need to diversify assets amid rising geoeconomic pressures.
Malaysian private equity investor Ian Yoong Kah Yin said a number of his relatives and acquaintances living in the Middle East returned to their home country when the Iran war began.
"Many contacts in hedge fund firms, asset management and family offices are preparing to relocate to Hong Kong and Singapore," said Yoong.
A family office is a special institution or team that manages the investments and financial needs of wealthy families.
The founder and CEO of Kane Capital Partners in Indonesia, Anthony Rollet, said tensions in the Middle East prompted wealthy families to reassess the risks of accumulating capital in one region.
According to Rollet, investors who are more able to get through uncertain situations are those who divide assets into several regions.
"This period of geoeconomic pressure shows the importance of having many options," Rollet said.
Dubai has long been a top destination for the wealthy due to its light tax policies, security, connectivity, and business-friendly environment. However, regional conflicts are beginning to affect its image as a safe place to store capital.
Senior lecturer at Taylor's University in Malaysia, Julia Roknifard, assessed that investor confidence would not immediately recover even if the conflict stopped.
Disruption also touches lifestyle and travel, two things that have attracted wealthy expatriates to live in Dubai. Roknifard estimates that some investors may move with their assets for security reasons and the risk of travel disruption.
However, capital flows from the Gulf do not always mean capital flight.
China Daily also quoted the founder of the AI-based trading platform xBratAI, Paul Bratby, who assessed that capital movements were more in the form of portfolio diversification.
"When capital moves out, it is a diversification of the portfolio, not a capital flight," Bratby said.
According to Bratby, state wealth funds in the Gulf region invested around $56 billion in various countries in the first nine months of last year. About 40 percent flowed into Asia.
Bratby said many family office managers still want to maintain a base in the Gulf while expanding investment access to Asia.
"They want access to Asia and a base in the Gulf, not choosing one," he said.
Dubai, said Bratby, is actually used as a starting point to invest capital in Southeast Asia.
The head of Saudi Family Holdings, Abbas Hashmi, said the spread of assets was indeed part of the strategy of the super-rich.
According to Hashmi, it is very unlikely that people with assets of around 60 million US dollars concentrate their investments on only one type of asset, region, or product.
"The question is not whether the money is out. The question is how well their portfolio is spread," he said.
Hashmi assessed that Singapore is still leading as a wealth management destination in Asia. However, Hong Kong is starting to catch up by offering more incentives for family offices.
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