(Reuters) - Private banks in Asia are advising clients to hold bonds and stocks with high dividend yields to ensure they receive a steady stream of income amid continued market uncertainty.
The private banking arm of JPMorgan (JPM.N) is telling clients to invest in emerging market currencies such as the Indonesian rupiah and high-dividend U.S. blue chips, while Citi's (C.N) private Bank says high-yield U.S. corporate bonds and Asian firms that pay good dividends are good bets.
"Since it is a trading environment... you'll want to have a core portion of your portfolio that is heavy weighted on fixed income so that while markets find a direction, you at least earn an amount of carry along the way," Citi Private Bank's Debashish Dutta Gupta said at the Reuters Global Private Banking Summit.
Asia's millionaires, particularly the more risk averse, are faced with a quandary over where to put their money as traditionally safe investments such as U.S. government bonds offer low yields even as the dollar looks set to depreciate against Asian currencies.
"All the talk on exiting policy and exiting stimulus has completely disappeared. Now it's going to be quantitative easing," said Julius Baer's (BAER.VX) chief investment officer for Asia V. Anantha-Nageswaran.
"It's essentially a policy of who gets to cheapen the currency fastest and the United States should be considered the hot zone favorite to do that," he added.
Besides holding gold, which other banks such as UBS are also advising, Anantha-Nageswaran recommends Asian investors hold Asian bonds for their higher yield and currency appreciation along with high dividend yield stocks such as Singapore-listed Starhub (STAR.SI) and Suntec REIT (SUNT.SI).
Others, however, warned that gold has become relatively expensive.
"We see less upside in gold than we see in platinum. Platinum has more of a catch up to play and there is also demand on the back of the car industry that needs it for catalytic converters," said Francois Monnet, head of ultra high-net-worth for Southeast Asia, Australia and Japan at Credit Suisse's private bank.
INDONESIA
On area where there is broad consensus among private banks is the potential offered by Indonesia, in terms of currency appreciation as well as steady economic growth.
Citi's Dutta Gupta described the country as a long-term play and said it was not too late for investors to jump onto the bandwagon.
"Throw your mind back to where Brazil was 10 years back when it was just coming out of the hyper-inflationary stage. In the first few years, the markets went up 20-30 percent every year so it was possible to buy the market 100 percent from the low and still make a significant amount of money," he said.
Indonesian stocks .JKSE have risen over 40 percent so far this year, while the rupiah is up about 5.3 percent against the dollar.
Private bankers attending the Reuters summit in Singapore and Hong Kong told Reuters that clients remained generally cautious and continued to hold large amounts of cash in their portfolios, despite the strong economic recovery across most of the region.
"It does seem like this time around, risk appetite among Asian investors is taking longer to recover," said Ivan Leung, JPMorgan private bank's Asia chief investment strategist.
(Reporting by Kevin Lim, Saeed Azhar and Harry Suhartono in SINGAPORE and Kelvin Soh in HONG KONG; Editing by Muralikumar Anantharaman)
