Published June 26, 2008

Asia-Pac's rich bracket outpaces the rest

Report projects region's wealth market growing at 7.9% annual clip to US$13.9t in 2012 - surpassing Europe as world's second wealthiest region


(SINGAPORE) Asia and the emerging markets captured the top 10 rankings in terms of the fastest growing wealthy population in 2007, with Singapore in sixth place.

Merrill Lynch and Capgemini's latest wealth report finds that the number of Singaporean wealthy individuals rose 15.3 per cent to about 77,000. The average wealth per individual is estimated to have risen from US$4 million previously to US$4.9 million. This is higher than the global average wealth per high net worth individual (HNWI) of about US$4.04 million.

Merrill Lynch market managing director (South Asia) Kong Eng Huat says the Asia-Pacific wealth market is projected to grow at a 7.9 per cent annual clip over the next five years to US$13.9 trillion in 2012. '(The region) will surpass Europe as the second wealthiest region after North America.' Merrill and Capgemini have forecast in their report a growth rate of 7.7 per cent for global wealth markets to a total US$59.1 trillion by 2012, taking into account recent world developments.

Recent economic downturns in the US have been shorter, it said, thanks to increasingly effective monetary policy. Emerging markets have also outpaced analysts' expectations. High net worth portfolios have also become more diversified and mobile. 'As growth in one region or market slows, HNWIs can move freely, reallocating their funds to other areas - often more quickly than the troubled market itself can react and recover. Ultimately, this evolution will make HNWI investments less vulnerable to market downturns,' said the report.

Globally, the combined wealth of the world's high net worth individuals - defined as those with investible assets of US$1 million - rose 9.4 per cent to US$40.7 trillion in 2007. This is a shade paler than the growth in 2006 of 11.4 per cent, due partly to a slower pace of world economic growth. The world's real GDP expanded 5.1 per cent in 2007, against 5.3 per cent in 2006.

In terms of asset allocation, the wealthy have generally reduced their exposure to real estate, and moved to cash and fixed income assets. Asia's wealthy reduced their real estate weighting from 29 per cent to 20 per cent. Cash and fixed income have a combined 46 per cent.

Mr Kong said: 'The wealthy have retrenched to safer assets. Domestic market allocations also gained favour, which is a tactical move of caution as investors wait for movements in the global markets.'

Merrill Lynch Global Wealth Management investment strategist Stephen Corry sounded a note of caution on rising inflation. Merrill's inflation expectations have been raised 190 basis points, and yet global interest rates have declined from 5.5 to 5.1 per cent. Even excluding the US, the increase in average global nominal rates is just 16 basis points.

'A lot of inflation is generated in Asia. Asia is growing too quickly but central banks are slow to move rates higher . . . You don't want to be in Asian bonds; be selective on Asian equities. The best bet is Asian currencies.' He favours the Sing dollar and ringgit.

This year's report included a highlight on 'passion investments' including art, luxury cars, and wellness. Globally, luxury collectibles accounted for 16.2 per cent of passion investments, and fine art 15.9 per cent. Among Asians, however, the preference is for jewellery and watches, which took up 19 per cent of their 'passion' dollar.

Meanwhile, private bankers are optimistic on the continued growth of the Asian wealth market despite rocky stock markets, worries over inflation and slower economic growth.

Said Akbar Shah, Citi Private Bank's head of mega-wealth (Asia Pacific) and region head: 'Our expectation for general growth continues to be around 15-25 per cent. Business activity is still quite robust although (stock) markets have consolidated. Businesses and wealth creation are our leading indicators. We still foresee a fairly healthy continuation of growth.'

UBS managing director Yeong Phick Fui said the fundamentals of continuing wealth creation, particularly in China, and the increased need for professional advice will continue to drive growth. 'We believe that any uncertainty in the near term will be an aberration rather than a permanent deviation from the strong underlying trend.'

Deutsche Bank global head of private wealth management Pierre de Weck said the bank has seen 'phenomenal' growth in Asia-Pacific, where revenues have risen 25 per cent a year over the last five years. 'In the first quarter, we attracted over 4 billion euros (S$8.5 billion) of new money, equating to 9 per cent of our assets at the beginning of the year. This is in line with the target range of 8-10 per cent we have set ourselves for this year.'

Jan Richards, managing director of JP Morgan Private Bank in Singapore, said: 'We expect continued growth even though the market has been volatile. We'll see a healthy business growth by the end of the year, as the number of millionaires is increasing. We're just continuing to try to hire people to accommodate this.' The bank focuses on the ultra high net worth market.

RBS Coutts Singapore head of private banking Raj Sriram said Coutts' business grew over 50 per cent in 2007, and he expects 'healthy' growth in the medium term. 'We have been seeing continued growth in clients' funds under management despite market volatility, although growth is at a slower pace than previous years. At the macro level, wealth creation in Asia shows no signs of slowing.'