Monday, April 5, 2010
Singapore is a Millionaire's country
Welcome to Millionaire Country!
Despite a dip, Singapore still has highest concentration of wealthy households
The Business Times
Thanks to the global economic crisis, wealth destruction has slashed the net worth of the rich all over. Singapore, however, has managed to stay on top with the highest concentration of millionaires.
According to a report by the Boston Consulting Group (BCG) 8.5% of Singapore households had more than US$1 million in assets under management (AUM) in 2008.
The global economic crisis has, however, eroded some wealth here. According to earlier reports, BCG found that Singapore had the highest concentration of millionaires in 2007 too, but the percentage then was higher: 10.6%.
Switzerland has the second highest concentration of millionaires at 6.6% followed by Kuwait with 5.1%.
Globally, the picture was not as rosy.
The number of millionaire households worldwide fell from 11 million to about 9 million, representing a drop of 17.8%. The decline was steepest in North America and Europe, at 22% in both regions, although the US continued to have the most millionaire households at nearly 4 million.
Interestingly, the BCG report found that the crisis narrowed the gap between the wealthy and non-wealthy. Wealth owned by households with less than US$100,000 in AUM increased 2% in 2008; it declined in all other segments. Among households with more than $5 million in AUM, wealth fell 21.5%.
This was attributed to the number of non-wealthy households rising 4% and the number of wealthy households declining 12%.
Things could start looking up next year.
'Wealth will begin a slow recovery in 2010 but may not reach its pre-crisis level until 2013,' said Ranu Dayal, a BCG senior partner and managing director based in Singapore. 'We expect wealth to grow at an average annual rate of about 4% from year-end 2008 through 2013.'
Mr Dayal also believes wealth will grow fastest in Asia-Pacific (excluding Japan) at 9.5% per year over the same period.
Still, Europe is currently the richest region in the world, after nudging out North America.
Europe had US$32.7 trillion in AUM in 2008, down 5.8 per cent from the previous year, followed by North America, with US$29.3 trillion.
Offshore wealth fell to US$6.7 trillion in 2008, down from US$7.3 trillion in 2007. Switzerland remained the largest offshore centre; it accounted for US$1.8 trillion, or 28 per cent of offshore wealth last year. Together, the UK, Channel Islands, Isle of Man and Dublin accounted for US$1.5 trillion while the US accounted for US$0.4 trillion.
Singapore accounted for US$0.5 trillion of offshore wealth while Hong Kong accounted for US$0.2 trillion.
BCG said that increased regulatory scrutiny is changing the landscape of cross-border wealth management, with pressure mounting on offshore centres that have based their edge primarily on tax avoidance. 'Once their tax and legal advantages evaporate, so too will their appeal,' Mr Dayal said. 'Being inconspicuous is a tenuous value proposition in an era of increasing oversight,' he added.
BCG does, however, believe that Singapore and Hong Kong will continue to benefit from their proximity to other Asian countries, where wealth is expected to stage a faster recovery.
Singapore now has 77,000 millionaires
Singapore has climbed the ranks of the millionaire club: It is now No. 7 in the world's top 10 list of fastest-growing populations of high rollers.
The country saw a 15.3% rise - or an addition of 10,000 people - to 77,000 millionaires, according to the 12th annual World Wealth Report, prepared by United States investment bank Merrill Lynch and information technology group Capgemini.
The report defines a millionaire as a person possessing more than US$1 million (S$1.37 million) in net assets, excluding his main residence and other consumables.
Asia was home to some of the world's fastest-growing populations of millionaires, according to the report.
Topping the top-10 list was India, followed by China. For India, the number of its millionaires jumped 22.7% last year to 123,000, while the number of high rollers in China rose 20.3% to 415,000.
Other countries in the top 10 list are Brazil, which took the third spot, followed by South Korea, Indonesia, Slovakia, Singapore, the United Arab Emirates, Czech Republic and Russia.
Despite financial turmoil and significant increases in the price of luxury goods, the report said the world's millionaires have an 'unquenchable appetite' for luxury items.
Jewellery, gems and watches attracted the largest share of these 'passion investment allocations' in Asia and the Middle East, the report said.
Globally, these high-priced toys tend to be art collections, yachts, personal jets and similar items, said Merrill Lynch and Capgemini.
But there are regional differences, with Asia's millionaires allocating the most to items like luxury and 'experiential' travel, visits to high-end spas and designer clothes, they said.
Asian millionaires' wealth would grow annually by 7.9% to US$13.9 trillion in 2012, against US$13.5 trillion among Europe's wealthiest, or 4.9% annual growth, the report said.
The number of millionaires in the Asia-Pacific grew 8.7% from a year ago to 2.8million people and their combined wealth soared 12.5% to US$9.5 trillion, excluding the value of their homes and consumables.
'In the Asia-Pacific region, wealth is being created at an unprecedented rate,' said Mr Kong Eng Huat, managing director (South Asia Market) at Merrill Lynch Global Wealth Management.
'Notwithstanding the recent dislocation in global markets, the robust economies in Asia are increasingly being driven by the domestic consumption story and continue to spur wealth creation in the region.'
Mr Kong added that, in 5 years' time, millionaires in Asia would have more combined wealth than those in Europe.
But the rich are also facing the challenges of slower growth in developed markets hit by the credit crisis as well as the risk of high inflation in emerging markets, the report said.