Hong Kong (Reuters): Citi’s private banking arm is telling its Asian clients to stay away from dollar denominated assets as it expects emerging market currencies to appreciate, its head of investments said on Tuesday.
Most of the clients of the private bank, which caters to those with investible assets of over $25 million, are themselves trying to diversify away from the greenback as they believe it will depreciate against Asian currencies, the private bank’s head of Asian investment Debashish Dutta Gupta said.
“It’s like turning the Queen Mary cruise liner around,” he said. “Many believe that the U.S. dollar is on a downward trajectory, but it takes a substantial amount of time to move away from assets that you’ve held for a long time.”
The dollar index, a gauge of its performance against a basket of six currencies, has been hovering around 11-month lows since the Fed announced a further loosening of monetary policy.
Gupta dismissed fears of a property and asset price bubble forming in China, saying that Beijing was taking steps to cool the country’s sizzling economy as inflation sped to a 25-month high in October.
“Nobody’s ever correctly forecast a bubble before,” he said. “The more people talk about a bubble forming, the less likely it is to happen. Bubbles only pop when nobody is expecting it, and every time the authorities crack down, I consider it to be a positive step that they’re cooling the market.” Shanghai’s stock market has fallen over 8 percent in the past two sessions, as retail investors spooked by rumours of more aggressive action to control inflation dumped large cap banking and energy shares.
The Indonesian currency and blue chip Indian stocks in companies such as Bharti Artel and Infosys were among Gupta’s top picks, adding that he could see the rupiah trading at 4,000 to the greenback in about five years.