Super Rich Fleeing Stocks and Bonds for Cash

[EV_Ares]

Many of the world's wealthiest people have moved their money out of stocks and bonds and into cash, the head of HSBC's Swiss private banking unit said.

"The first half of 2008 has seen a notable change in client expectations and investment choices," said Peter Braunwalder, chief executive of HSBC Private Bank (Suisse), the British-based bank's main affiliate catering to the ultra-rich.

"Faced with inflation worries, volatile asset prices and sudden changes in exchange rates, a majority of investors have reduced their transaction volumes in equities, bonds, and structured products," he told a news briefing in Geneva.

This was particularly true for clients from Asia, whose demand for complex investment tools such as equity derivatives has "drastically decreased" in response to recent financial market upheaval, said Braunwalder.

"Concurrently, most clients increased their cash allocation and, for some, their leverage," he added.

Investors worldwide have been scrambling to find a safe place for their savings this year in the face of a global economic slowdown, a credit crisis that has spooked markets, and an energy price spike spurring concerns about inflation.

Alexandre Zeller, who will replace Braunwalder as HSBC Private Bank (Suisse) chief on October 1, said that concerns about inflation would dominate many investing decisions ahead.

"My worry is that a lot of liquidity has been injected in the markets by central banks to solve the (credit) crisis," the former head of Banque Cantonale Vaudoise said, raising concerns about how that liquidity will be removed from the market, and whether interest rates would have to rise as a result.

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HSBC Private Bank (Suisse), rated AA by Standard and Poor's and Aa3 by Moody's, has been more shielded from recent banking sector woes than its larger Swiss rivals UBS and Credit Suisse.