Asia's legendary savers missing out by being too conservative, says StanChart study

An average of 39 per cent of "emerging affluent" individuals in seven Asian countries rely on savings accounts to meet their top savings goal.
An average of 39 per cent of "emerging affluent" individuals in seven Asian countries rely on savings accounts to meet their top savings goal. ST PHOTO: JAMIE KOH

HONG KONG (BLOOMBERG) - Asia's legendary savers are missing out on greater wealth by being too conservative, according to a study by Standard Chartered.

An average of 39 per cent of "emerging affluent" individuals in seven Asian countries rely on savings accounts to meet their top savings goal, while just 18 per cent use investments in equities, according to figures in the survey released Monday.

"What came out in the study, which is surprising, is the conservative nature of many of the emerging affluent," Karen Fawcett, Standard Chartered's retail banking head, said in a phone interview. "We're suggesting that with a little more advice, they could be making more money from their hard-earned savings."

The most extreme example of a cautious approach to saving came from Pakistan, where some 50 per cent of those surveyed said they keep their savings at home in cash, avoiding the banking system altogether, according to the report.

Banks from Standard Chartered to HSBC Holdings are seeking to tap into burgeoning middle-class wealth to revive earnings hobbled in recent years by mounting capital charges as well as regulatory and legal costs. The "emerging affluent" segment is one of the pillars of Fawcett's digital-driven strategy to expand Standard Chartered retail business, which accounted for about a third of the lender's global operating income in 2016. All but 18 per cent of the retail division's US$4.7 billion of income last year came from Asia, the bank's annual report shows.

Gross savings in East Asia and the Pacific amounted to 45 per cent of the region's gross domestic product in 2015, more than 22 per cent for the European Union and 19 per cent in North America, according to World Bank figures.

Different income ranges were applied to the Asian countries in the Standard Chartered study, which was conducted by research firm GlobeScan. Respondents from China, for example, came from households with gross monthly incomes of between 20,000 yuan (S$4,046) and 40,000 yuan, while in Singapore, the range was S$5,000 to S$16,000.

Fawcett said she defines emerging affluent as a consumer class that is able to set aside money each month to build savings for future goals.

By switching from a mostly basic savings approach to a "low-risk wealth management investment strategy," savers in these markets could boost their returns over a 10-year period significantly, for example by as much as 86 per cent in Hong Kong, according to the report.

"These types of people are big savers," Fawcett said. "They've got very big dreams so they are saving for those big events: buying a house, educating their kids or for their retirement."