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October 13, 2006
Asia-Pacific Wealth Report: Five Asian markets rank in the Top 10 fastest-growing HNWI populations worldwide
The news was reported as Merrill Lynch and Capgemini unveiled their Asia-Pacific Wealth Report, which is a regional extension of the firms' annual World Wealth Report and provides an in-depth view of the changing Asia-Pacific wealth management market.
In addition, it was reported that the region was home to five of the 10 fastest-growing HNWI populations in the world, and the number of HNWIs grew by 7.3 per cent to 2.4 million from 2004. The number of Ultra-HNWIs, those having net financial assets of more than USD 30 million, grew by 12.1 per cent, to 15,600. The total wealth of the Asia-Pacific high net worth population was USD 7.6 trillion in 2005, growing at an 8.0 per cent pace over 2004.
It was noted that above-average performance of wealth-creating economic drivers, including the primary catalysts of GDP and market capitalization, bolstered wealth accumulation in the region.
'The findings of the Asia-Pacific Wealth Report reinforce many of the themes that we have long-championed for this part of the world," said Raymundo Yu, Head of EMEA & Pacific Regions for Merrill Lynch's Global Private Client Group. He added that, "The future of the wealth management industry in Asia holds many exciting opportunities as the region is home to some of the world's fastest-growing economies."
While 2005 growth rates for GDP and market capitalization in Asia-Pacific mirrored the world's slowing trend following 2003's crest, the region's economies grew at a faster rate than those in other parts of the world. HNWIs in Asia-Pacific continued to benefit from strong economic conditions in 2005, adding wealthy investors to their ranks and expanding their financial wealth.
The Report found that wealth was more heavily concentrated in the lower HNWI wealth bands and that Ultra-HNWIs grew at a faster pace than HNWIs in 2005. This faster-paced growth in the higher wealth bands suggests that wealth will concentrate as Asian markets further develop, a trend confirmed among maturing markets.
Differences Define Market Potential
Five Asia-Pacific markets ranked among the global top 10 fastest-growing HNWI populations in 2005, according to the Report. South Korea, India and Indonesia were the three fastest growing HNWI populations in the world, surging 21.3%, 19.3% and 14.7%, respectively.
Japan maintains more than half of the HNWIs in the region, but only a 30% share of Ultra-HNWIs. Together, China and Japan hold over 65% of the region's USD 7.6 trillion financial wealth.
HNWI saturation levels differed by market, suggesting varying levels of market potential. The Report found that Hong Kong, Japan and Singapore showed higher than average levels of market saturation, while Indonesia, India and China ranked lowest in terms of their HNWI concentrations. HNWIs from China and Hong Kong had the highest average net worth.
Asset Allocations Remain Diversified and Conservative; Lack Strong international Exposure
Confirming a trend observed in the 2006 World Wealth Report, HNWIs in Asia-Pacific pursued diversified asset allocations in 2005. Favoring equities and alternative investments, HNWIs invested nearly a quarter of their portfolios, 24% and 23% respectively, into each asset class.
'While they exhibited a preference for sophisticated alternative investments, Asia-Pacific HNWIs sought to offset higher-risk investments by holding a significant portion of their assets in more conservative asset classes,' said Yu.
Asia-Pacific HNWIs' international allocations exhibited a more narrow focus compared to other regions. More than half of HNWIs' assets were invested within the Asia-Pacific region and more than a quarter of assets were allocated to North America, with the balance spread across Europe, Latin America and the Middle East.
Varying Stages of Market Development Create Opportunities for Wealth Management Providers
The Report groups each market into one of three broad stages of wealth management maturity: Emerging, Developing and Mature.
China and India represent the Emerging markets of Asia-Pacific as they provide a largely untapped pool of wealth for wealth management institutions. Currently, the wealthy sectors in these two markets, while growing rapidly, lack investment experience. Underdeveloped capital markets, capital controls, currency inconvertibility and strict licensing requirements create a thorny wealth investment environment for HNWIs looking to invest and for wealth management providers aiding in the process.
'Difficulties exist specifically in developing entry strategies, attracting clients to wealth management services and building investor sophistication' said Dirk Chanmueller, Vice President & Financial Services Leader, Capgemini Greater China.
Markets classified as Developing in the Report include Indonesia, South Korea and Taiwan. These markets prospered earlier than the Emerging markets and provide valuable lessons for wealth management institutions looking to access Emerging HNWIs. With more advanced capital markets, HNWI clients have started showing enhanced investment sophistication and the need for more complex wealth management solutions. Some clients have moved up to more sophisticated services such as trusts, philanthropy and capital-raising. 'Foreign institutions will find it more difficult to break into these markets as domestic banks control the majority stake of HNWI clients,' said Chanmueller.
Japan, Hong Kong and Singapore registered as Asia-Pacific's key Mature markets. The Japanese wealth management market is encountering strong demand. With client demand up, there is intense competition for experienced financial advisors, training personnel, and IT professionals.
Hong Kong and Singapore are the most advanced wealth management markets in Asia-Pacific and 'each has an influence span significantly wider than its own borders,' said Chan Mueller. While sharing similar traits, a competitive rivalry fuels each market's drive to be considered the best. Singapore aspires to become 'Asia-Pacific's Switzerland', an island oasis for HNWIs, while Hong Kong has long been considered the gateway to China's HNWI market.
-HedgeWeek.com-
Posted by su at October 13, 2006 4:25 PM