Monday, June 14, 2010

Singapore, Malaysia Lead Global Wealth Recovery

Singapore and Malaysia led a recovery of global wealth to pre-crisis levels as the number of millionaires grew by about 14 per cent in 2009, the Boston Consulting Group said.

The number of millionaire households increased to 11.2 million, according to the study released yesterday by the Boston-based firm. Singapore posted a 35 per cent gain, followed by Malaysia, Slovakia and China. In 2008, the number of millionaire households fell about 14 per cent to 9.8 million.

“Given the severity and magnitude of the crisis, I’m surprised at how fast global wealth has come back,” Bruce Holley, a senior partner in the firm’s New York office and topic expert for wealth management and private banking for the US, said in a telephone interview before the report was released.

Global wealth rose by 11.5 per cent after falling 10 per cent in 2008, as assets under management increased to US$111.5 trillion, close to the annual study’s record US$111.6 trillion in 2007. North America, defined as the US and Canada, had the greatest gain in assets at US$4.6 trillion to US$35.1 trillion. The US also had the most millionaire households at 4.72 million, the survey said, while Europe remained the wealthiest region, with US$37.1 trillion.

Asia-PacificWealth in the Asia-Pacific region, excluding Japan, is expected to rise at almost double the global rate, the study said. Global wealth will increase at an average annual rate of almost 6 per cent from year-end 2009 through 2014, which is higher than the 4.8 per cent annual growth rate from year-end 2004 through 2009.

Asia-Pacific will increase its share of global wealth from 15 per cent in 2009 to almost 20 per cent in 2014, with China and India the engines of growth. Together, the two countries will make up 75 per cent, or almost US$9 trillion, of the increase in assets managed in the region over the period.

Singapore also had the highest proportion of millionaire households at 11.4 per cent, followed by Hong Kong and Switzerland. The fourth, fifth and sixth spots were in the Middle East -- Kuwait, Qatar and the United Arab Emirates. The US was seventh-highest at 4.1 per cent.

“The model is about how the wealth jam is being spread, based on the underlying GDP,” said Roman Scott, managing director of Singapore-based Calamander Capital Pte, which advises private banks. “The fuel that feeds the private-banking industry is the amount of wealth that’s being created. In Asia, it’s not a huge stock of old wealth, but rather, lots of newly created wealth from economic activity.”

Current numbers may differ from those in last year’s report because of currency fluctuations and newer available data, said Peter Damisch, a BCG partner and a co-author of the report. The study looked at 62 countries representing more than 98 per cent of global gross domestic product.

Wealth RecoveryThe recovery in wealth last year was a result of resurgent financial markets and increased savings, the report said. The Standard & Poor’s 500 Index rose 20 per cent in 2009 and the US savings rate averaged 4.2 per cent compared with 2.6 per cent a year earlier.

Global wealth dropped in 2008 for the first time since the survey’s 2001 inception as the credit crisis sent stock indexes tumbling and slashed the value of real-estate holdings, hedge- fund and private-equity investments. Last year’s survey had said total wealth wouldn’t return to pre-recession levels until 2013.

Less than 1 per cent of households globally were considered millionaires, which is defined as investable assets of more than US$1 million, exclusive of real estate and property such as art. Wealth became more concentrated with millionaire households controlling 38 per cent of the world’s assets compared with 36 per cent a year earlier, the study said.

‘Still Feel Burned’The amount of offshore wealth, defined as assets housed in a country other than the investor’s legal residence, increased to US$7.4 trillion after declining to US$6.8 trillion in 2008 as global regulators pressured countries such as Switzerland to cut down on bank secrecy. Switzerland remained the largest offshore center, with about 27 per cent, or US$2 trillion, of assets, the report said.

The offshore business is expected to grow driven by emerging markets, even with increased regulatory pressure. It will grow at above 6 per cent, versus the 2 per cent growth in traditional markets, the report said.

The report’s authors also looked at the performance of 114 wealth management firms worldwide and found revenue declined by an average of 7.3 per cent as assets under management increased an average of 14.3 per cent. Reasons for decreased revenue include fewer transactions, tougher price negotiations and a shift to lower-risk asset classes and investments that are liquid and simple, the study said.

Investors feel frustrated and distrustful following the market events beginning in 2008, despite the increase in wealth, Holley said.

“People still feel burned,” said Holley. “I think the numbers in the report suggest a much rosier experience than how people actually feel.” -- Bloomberg

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