New wealth index reveals spreading of the
global elite
A unique Household Wealth Index
reveals that in
2017 the global wealth boom to continue but the gap between developed
and
developing markets is closing. The split between the G7 and leading
‘emerging
markets’, in terms of overall household wealth will narrow.
China
is forecast to
accelerate from 7th to 3nd place; India
jumps from 14th to 8th place
in the global wealth rankings. Investor education is becoming
absolutely
essential to avoid over concentration in any one particular asset class.
Among the other conclusions, the number of countries with more than one
million
dollar-millionaires will increase from seven to 12 in 2017. Singapore, Hong Kong,
Switzerland,
UK
and Denmark
are expected to top the
wealth rankings in terms of density. The stock of Foreign
Direct
Investment (FDI) into the UAE is estimated (in the absence of official
UAE
based FDI data) to exceed US$100 billion by 2011, around 33%
of UAE’s GDP
The Household Wealth Index, developed
by Barclays
Wealth and the Economist Intelligence Unit (EIU), predicts how the
global
distribution of household wealth will change over the next ten
years.
Published today in a report entitled
Barclays
Wealth Insights: Evolving Fortunes, the Household Wealth Index is the
first
forward forecast of its kind predicting the future spread of wealth
across 50
countries. In order, the top 10 wealthiest countries in 2017 will be:
1) USA,
2) Japan,
3) China,
4) UK,
5) Germany,
6) France,
7) Italy,
8) India,
9) Canada
and 10) Spain.
In 2017 there will be more than 61
million high
net worth households in excess of US$1 million in the top ten
wealthiest
countries (compared to just 34.5 million in 2007) and their combined
wealth
will exceed US$154 trillion. The number of households in
excess of US$5
million in these ten countries will reach a staggering 5.2
million within
10 years, compared to two million in 2007.
A
fusion of developed and developing
markets
The Household Wealth Index clearly
shows the gap
closing between the established economic superpowers and the rising
stars
amongst the developing countries.
The new report reveals that whilst the
US
remains at
the top of the Index a number of the emerging markets will perform
strongly
over the next ten years. Most significantly, China
accelerates from 7th to 3rd place in the overall wealth rankings.
Whilst India
will jump from 14th to 8th place and Russia
is
catapulted from 19th place to 11th place, meaning that it is on the
verge of
becoming one of the top ten wealthiest countries. Brazil
is not
far behind moving from 15th place to 12th by 2017. The
success of the
developing markets will see developed economies like Australia
and South
Korea
move down in the rankings (from 10th to 16th and 12th to 15th
respectively).
Further down the table strong
performances are
predicted from the maturing economies of Turkey
(rising from 32th to 26th place) and Malaysia
(moving from 35th position
to 28th). Again, the success of newer markets has
caused the
displacement of historically stronger countries, such as Norway
repositioned from 27th to 31st.
Michael Dicks, Head of Research at
Barclays
Wealth, said: “The Household Wealth Index clearly shows the gap closing
between
the established economic superpowers and the rising stars in terms of
wealth
creation in just ten years time. By 2017 China, Russia and
India will
overtake some of the world’s most developed countries, and this
suggests that
it is no longer accurate to label these markets as ‘emerging’
and
‘developing’ economies.”
China
the world’s fastest growing economy
In only a decade China will have been
catapulted from seventh to third place of
the global wealth index, and as a result the Eastern star is forecast
to
experience an incredible increase from 22,000 to 409,000 in its US$1
million households population. The country’s stellar
economic
growth, frenetic industrialisation and urbanisation, together with
preparations
for the Beijing Olympics, have helped fuel a nationwide construction
boom that
has enriched many Chinese.
India one of the globe’s fastest-growing
affluent markets
India
will move into the top ten in 8th position by 2017. The
country has been
transformed from a slow-growing agrarian economy into one of the worlds
most
dynamic in less than two decades. This economic boom has led to an
unprecedented level of wealth creation in India. A
strong stock
market, rising entrepreneurship and widespread investment in Indian
real estate
has resulted in it becoming one of the fastest-growing affluent markets
in the
world.
GCC a
well of liquidity
Despite talk of recession and a credit
crunch, the economic success story of
the oil-rich, high-liquidity Gulf countries (Bahrain,
Kuwait,
Oman,
Qatar,
Saudi Arabia
and the United Arab Emirates)
continues unabated.
Much of the GCC’s current liquidity
can be
attributed to demand for commodities, which is currently being driven
in large
part by resource-hungry Asian countries. According to the IMF,
annual oil
exports from the GCC countries have reached US$400 billion, and are
forecast to
rise to US$450 billion next year.
Soha Nashaat, Managing Director, Head of Barclays Wealth, Middle East,
North
Africa & Turkey
said that "other factors have also played a part in the huge increase
in
wealth in the region. Low interest rates, the repatriation of finance
in the
wake of the September 11 2001 terrorist attacks, and the policy
decision of
many GCC governments to diversify their economies beyond hydrocarbons
have all
played a role. As a result of these trends, privately held wealth in
the region
has increased significantly.”
In many GCC countries there is a
strong cultural
bias towards investing privately held wealth into physical assets or
direct
business transactions, with real estate being the preferred asset class
for
investors in the GCC. This preference is driven by two separate events:
first,
the stock market correction in early 2006, which left many regional
retail
investors nursing significant losses; and second, the real estate boom
in the
region, where property prices have been increasing rapidly for a number
of
years.
In view of the ongoing real-estate
boom in the
country, which is drawing investors to Dubai
and
to Abu
Dhabi,
the Economist Intelligence Unit estimates that annual inflow of FDI
rose to
US$16 bllion in 2006.
Based on these figures and trends, and in the absence of official
published
data, the EIU has estimated that the total stock of FDI stood at US$44
billion
or 27% of GDP in 2006. With international oil prices forecast to remain
above
their long-term average over the next five years, and concomitant
liquidity in
the region therefore expected to remain high, we expect the stock of
FDI to
exceed US$100 billion by 2011 (around 33% of GDP).
Soha Nashaat said that "these forecasted FDI figures are further proof
to
the success of the visionary leadership in the region and the drive
towards a
sustainable and economically prosperous future. The Middle East will continue to be
a region of strategic importance and
future growth for Barclays Wealth.”
Education
on risk and diversification is
key
Regulatory change and deepening
capital markets
are offering households in the new leading wealth centres a more
diversified
range of investment options. Looking at financial allocation in China, equities have
increased from 10% in 2004
to 16% in 2007, in Russia
it
has increased from 49% to 66% and in India
from 60% to 69%. By contrast,
allocation to equities in the US,
UK
and Germany
has
remained more or less constant over the same period.
The rapid rate of growth and often
spectacular
returns from local equity and real estate markets has attracted a new
and often
inexperienced investor public. Using China
as an example, the economy
grew by 10.2% in 2007 and as a result many wealthy Chinese have no
desire to
diversify their holdings into other, slower-growing international
markets, when
in recent years they have typically been enjoying, for example, 10% to
15%
returns on their local property markets. This home bias and
undiversified approach
to the allocation of assets is a common characteristic of countries
including China,
Russian and India.
With the development of local capital
markets and
growing appetite among investors to participate in their countries
economic
growth, Gerard Aquilina, Head of International Private Banking at
Barclays
Wealth, believes that education is key.
“Either through the financial services industry or the government,
investor
education is absolutely essential to avoid over concentration in any
one particular
asset class," he said.
The
volume of dollar millionaires
The Household Wealth Index includes a
projection
of the number of wealthy households. By 2017 12 countries will
be home to
more than one million dollar-millionaire households, compared to seven
currently.
The USA
has a significant lead with an estimated 30 million dollar-millionaire
households expected in 2017, a growth rate of 81% (from 16.6
million).
Despite their considerable progress in
the
Household Wealth Index, developing markets are still some way behind in
terms
of the volume of dollar-millionaires they house. The fact that, even
in ten years’ time, the countries in the list tend to be the
most
developed economies suggests that in terms of absolute numbers of
wealthy
individuals, established markets will continue to present significant
opportunities to companies targeting a high net worth population.
The
concentration of the global elite
The countries with the highest
percentages of dollar-millionaires will remain
consistent over the next ten years. The small, heavily
populated financial
centres such as Hong Kong,
Singapore
and Switzerland
will still top the
wealth rankings in terms of density in 2017.
Countries rising through the ranks in
terms of
density of millionaires include Japan,
Denmark
and the Netherlands,
along with Brazil
and Turkey
further down the table. The
density of millionaires in China
will remain mostly unchanged over the next decade, causing it to drop
in
ranking.
Note: Barclays Wealth Insights: Evolving Fortunes is the fifth
instalment of an
influential series launched in December 2006. It provides a unique
examination
of the future global spread of wealth, including the projection of the
number
of wealthy households in 2017 in 50 markets; an in-depth examination of
the
drivers for and impacts of new wealth and a specific analysis of the
performance of developing markets. The Barclays Wealth Insights series
is
developed in partnership with the Economist Intelligence Unit (EIU).
Barclays Wealth has again partnered
with the
Economist Intelligence Unit (EIU) to produce a new wealth index, the
first
predictive study of its kind, to measure wealthy households in 50
countries
categorised by asset bands of US $500,000, US$1 million and
US$3 million.
Based on data split into financial and non-financial wealth, and
combined for
an aggregate figure it will build further on the analysis of Barclays
Wealth
Insights Volume 1 to demonstrate an increasing depth and credibility to
the
Insights research programme.
The report also includes qualitative
research in
the form of content from ten interviews with global wealth experts,
economists,
academics and senior executives from businesses targeting a high-net
worth
demographic to add context and colour to the forecast findings. It also
include
interviews with two representatives from Barclays Wealth to offer
in-depth
colour to the profile of high-net worth individuals in emerging markets
and
build on comparisons with developed markets.
07 May 2008 by Moussa Ahmad
Source:
Barclayswealth.com