UBS says wealthy Asians are abandoning Aus­tralian dol­lars

The Pak Banker - - COMPANIES/BOSS -

SIN­GA­PORE: Asia's wealthy are fall­ing out of love with the Aussie dol­lar as record-low yields and sus­tained de­clines per­suade them to look else­where, ac­cord­ing to UBS Group AG.

Many of the bank's wealth­i­est clients in the re­gion be­gan to aban­don the cur­rency as Aus­tralia's bond yield pre­mium over the US slid and the Fed­eral Re­serve dis­cussed rais­ing in­ter­est rates, said Si­mon Smiles, Zurich-based chief in­vest­ment of­fi­cer for ul­tra-high-net-worth in­di­vid­u­als.

The 10-year yield is 74 ba­sis points above that of the U.S., down from 130 a year ago. "Two years ago when I came to the re­gion, in most client meet­ings, peo­ple were ask­ing about Aussie as­sets, the Aus­tralian dol­lar, yield play; when you talk about it now, there's almost no in­ter­est," Smiles said in an in­ter­view on Mon­day. "From the third quar­ter of last year, there's a grow­ing belief that the US dol­lar would start a sus­tained ap­pre­ci­a­tion trend." The Aussie has tum­bled 16 per­cent in the past six months to the weak­est level since 2009 and Re­serve Bank of Aus­tralia Gov­er­nor Glenn Stevens has said he ex­pects it to ex­tend de­clines. The lo­cal dol­lar has fallen less than the euro and the cur­ren­cies of Den­mark, Canada and Norway this year and "should be the next domino to fall," said Olivier Kor­ber, a strate­gist at So­ci­ete Gen­erale SA in Paris.

Aus­tralia has been strug­gling with the end of a once-in-a-cen­tury re­sources boom and a slow­down in China, which buys more than 35 per­cent of the South Pa­cific na­tion's ex­ports. A Deutsche Bank AG in­dex track­ing the prices of com­modi­ties im­por­tant to Aus­tralia has tum­bled 30 per­cent in the past 12 months with iron ore and ther­mal coal slid­ing to multi-year lows.

China's econ­omy grew 7.4 per­cent in 2014, the slow­est pace in 24 years. The ex­pan­sion will weaken to 7 per­cent this year, ac­cord­ing to the me­dian es­ti­mate in a Bloomberg News survey. "The big­gest struc­tural con­cern for Aus­tralia and the cur­rency is prob­a­bly the land­ing of the Chi­nese econ­omy amid fall­ing com­mod­ity prices," So­ci­ete Gen­erale's Kor­ber said in an e-mail in­ter­view on Jan. 23. Aus­tralia's dol­lar is set to end the year at 77 U.S. cents, he said. An ear­lier-than-ex­pected de­cline be­low this level may ac­cel­er­ate its de­scent to­ward 70 cents, he said. ? The Aussie was lit­tle changed at 79.24 cents at 12:42 p.m. in Syd­ney after de­clin­ing on Mon­day to 78.55 cents, the weak­est since July 2009.

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