[PB Notebook] Questions from Gangnam's Wealthy These Days

Shim Hyejin Hana Bank Dogok PB Center Branch GOLD PB Manager

The pattern of accumulating wealth through real estate in the past has evolved and diversified recently into equity investments and virtual assets. Having worked for about 20 years in the Gangnam area in roles such as PB (Private Banking), I believed these individuals had a unique sense for 'money.' I have summarized the main inquiries they currently make. If readers find themselves thinking of similar questions, it would be fair to say you have a keen sense as well.

First is 'En-tech' (investment using the Japanese yen). There have been many inquiries about financial strategies using the rapidly declining yen. Since profits were realized last year using the US dollar, interest in the currently weak yen has increased. If it were simply about buying and selling for foreign exchange gains, the questions would focus on exchange rate trends. However, since Japan's interest rate is '0,' and domestic yen deposit rates are also zero, inquiries tend to be about products to invest in with yen held or to be held, rather than simple forex trading.

Let me start with stocks. Thanks to Japan's low interest rate policy, Japanese stock prices have soared since last year. The Japan Exchange Group demanded explanations and countermeasures for the low price-to-book ratios (PBR) mostly below 1 of listed companies, and recently Warren Buffett, chairman of Berkshire Hathaway, announced investments in Japanese stocks, particularly in diversified general trading companies, which quelled concerns about overvaluation and pushed prices up. Since 2023, foreign net purchases have reached 7 trillion yen (approximately 67 trillion won). The weak yen and low interest rates are factors preventing stock price declines, so this trend is expected to continue for the time being. For investors new to Japanese stocks, it is recommended to buy in installments through diversified exchange-traded funds (ETFs) or public funds. If there is no confidence in Japanese stock prices, there are also equity-linked securities (ELS) invested in yen.

Next is bonds. Japanese bonds have 'zero' interest rates, so investing in Japanese government bonds is meaningless. It is better to invest in US Treasury ETFs listed in the Japanese market using yen. Currently, both US Treasuries and the yen have fallen excessively from their peaks, making it a good opportunity for bargain buying. Currency risk between yen and dollar can be avoided with currency-hedged ETFs.

There are also inquiries about real estate investment. When the exchange rate fell below 1,000 won per 100 yen last year, there were inquiries about purchasing real estate in Tokyo. Those who bought Japanese real estate at that time tend to be satisfied with their investment, as the rise in property prices outweighed losses from exchange rate declines.

When investing in foreign currencies, there is always anxiety that profits generated from assets could be offset by exchange rate declines. In the current situation where the interest rate gap between the US and Japan has widened to an unprecedented level, if the Federal Reserve pivots (halts tightening), the interest rate gap between the two countries will narrow, and yen carry traders (those who borrow low-interest yen to invest in higher-yielding assets) may liquidate positions, increasing the possibility of yen appreciation. Therefore, the yen's depreciation is expected to be limited. This weak trend will not easily recover in the short term due to trade deficits and the Bank of Japan's (BOJ) continued easing policy. However, since products involving exchange rates carry significant risks, it is most important to make decisions according to one's investment style.

There are also inquiries related to inheritance planning. With increased advertising exposure and various institutions offering YouTube videos and seminars on inheritance and gifting, people who previously only considered simple notarized wills are now interested in substitute wills trusts that banks can execute in the event of incapacity. The cause is the intensification of family conflicts due to complicated family relationships and support issues arising from aging. More inquiries are expected in the future. Additionally, there are steady inquiries about trusts related to disabled family members, who are often a sensitive issue. These trust contracts provide financial support services for disabled children left behind after the death of (mostly) parents currently supporting them, and clients are very satisfied with these arrangements.

This content was produced with the assistance of AI translation services.