China, India and Singapore posted the biggest increases in millionaires last year as the Asia-Pacific region countered a decline in wealth in western Europe and the US, according to Boston Consulting Group.
Millionaire households in China rose 16 percent to 1.43 million while those in Singapore climbed 14 percent to 188,000 and India saw a 21 percent increase to 162,000, the Boston-based firm said in a report released today. Millionaire households in the US fell by 129,000 to 5.13 million.
Europe’s debt crisis and declining equity markets slowed the increase in global wealth last year with a 1.9 percent gain to $122.8 trillion compared with a 6.8 percent growth rate in 2010, Boston Consulting said. Singapore had the highest proportion of millionaire households while Hong Kong led the rankings for the percentage of billionaires.
“It’s the first significant interruption of growth since the financial crisis,” said Peter Damisch, a partner with Boston Consulting in Zurich. “Emerging markets will play a bigger role in private wealth going forward.”
The Stoxx Europe 600 slid 11 percent last year with industrial and financial-services companies among the biggest decliners. Germany’s Dax Index tumbled 15 percent while the Standard & Poor’s 500 Index was little changed.
Wealth in North America declined 0.9 percent to $38 trillion, while western Europe posted a 0.4 percent drop to $33.5 trillion, the report said.
Global wealth surged at a compound annual rate of almost 11 percent from 2002 to 2007 before the financial crisis and the indebtedness of developed-market economies slowed growth, according to Boston Consulting data. The firm predicts a growth rate of 4 percent to 5 percent over the next five years, driven by wealth creation in emerging markets.
Asia-Pacific, excluding Japan, saw an 11 percent increase to $23.7 trillion and will maintain that growth rate to surpass private wealth in Europe over the next five years, Boston Consulting predicted. The region may reach $40 trillion by 2016, it said.
Boston Consulting expects private wealth in China and India will increase by 15 percent and 19 percent a year respectively through 2016, with affluent Chinese more than $10 trillion better off by the end of the period.
Wealthy individuals in Latin America saw an increase of almost 11 percent in assets last year, lifted by economic growth in Brazil and Mexico.
Singapore has 17 millionaire households in every 100 with the Gulf states of Qatar and Kuwait, which were less affected by the Arab Spring than other Middle East oil-producing nations, ranked second and third, according to Damisch.
Switzerland, which came fourth with 9.5 percent, was top of a ranking for the proportion of households with more than $100 million, according to Boston Consulting’s 12th annual wealth management report, which surveyed 63 markets. The Alpine country had 11 households per 100,000, followed by Singapore with 10 and Austria with eight.
Boston Consulting omitted Saudi Arabia from its ultra- wealthy ranking because it was too difficult to define different households within the royal family network, Damisch said.
Cross-border assets in Switzerland, the biggest offshore centre, were unchanged at $2.1 trillion as the repatriation of funds by clients in neighbouring European countries was offset by inflows from emerging market customers, the report said. Western European offshore wealth in Swiss banks dropped 2.2 percent while assets in Switzerland and Luxembourg originating in North America “dwindled to an almost negligible amount,” Boston Consulting said.
Worldwide investors still increased offshore assets 2.7 percent to $7.8 trillion with Hong Kong and Singapore among the beneficiaries. The two biggest Asian offshore booking centers may surpass Switzerland in terms of size in the next 15 to 20 years, according to the report.
The shift in wealth growth to emerging economies poses a challenge for wealth-management firms based in the US and Europe, according to Damisch. Finding and keeping talent in these developing markets is a “key success factor” and businesses may need to make several years of investment before making a profit, the report said.
“For the ‘old world’ it’s all about revenue and profit protection,” Damisch said. “It’s tempting to run after emerging markets because of the high growth rates, but establishing a profitable business model is not that easy.”