Elites Took a Hit Last Year: Asian Elites Took the Biggest
|Oct 15th, 2012 | Filed under: Commodities, Timely Research, Today's Post | By: cfaille||
Wealth-X, a Singapore-headquartered firm providing members with intelligence on ultra-high net worth individuals and on the privately held companies that they control, has made available its “World Ultra Wealth Report 2012-2013,” giving a glimpse of where the elite is growing, where it is shrinking, region by region and country by country.
All wealth figures below are in U.S. dollars, as is the case in the Wealth-X Report.
Taking a Hit
The ultra-high net worth population begins by definition at an individual worth of $30 million. Of the total UHNW population, more than two fifths (43.6 percent) belong in the lowest category, worth between $30 million and $49 million. The highest tier, the billionaires, totaling just 2,160 globally, represents 1.2 percent of the UHNW population.
The combined wealth attributable to the UHNW population shrank 1.8 percent over the last year, due to the continuing crisis in the Eurozone and slowdowns in the emerging markets. Asia saw a much larger reduction: the wealth attributable to its UHNW population fell by 6.8 percent. Hong Kong, China and Japan led the losses in that region.
Indonesia is an exceptional country within the Asian region. Not only did Indonesia’s economy grow last year, it did so at an impressive pace: 6.5 percent. Further, rating agencies have recently raised the country’s sovereign credit rating. These facts have been good for the UHNW. There were 750 UHNWs in the country last year, there are 785 this year. Their total wealth was $85 billion last year. It is $120 billion this year.
As you can see from the chart above, India’s population of UHNW individuals on the other hand declined by 5.9 percent over the last year, and its wealth shrank by nearly as much, 5.7 percent. The decline shows up in almost every one of the eight tiers of UHNW-ness: smaller population for each tier, lesser total wealth. India as a nation has suffered from the decline of foreign direct investment and the poor performance of the country’s equity markets.
North America is on the opposite side of the spectrum. Its UHNW population increased by 3.3 percent last year and the wealth it holds increased 2.8 percent.
In the Middle East
In the Middle East, rising oil prices have created a “petrodollar liquidity flush,” but the region suffers from political instability and scary headlines on same. Even the petrodollars are a mixed blessing: the region badly needs diversification to render its growth sustainable. The total wealth of the area’s UHNW class has declined over the last year. In Saudi Arabia in particular, the total wealth of this segment of the population has been flat: it was $230 billion last year and is $230 billion still.
The hotspot of this region is the United Arab Emirates, which is made up of seven entities: Abu Dhabi, Dubai, Sharjah, Ajman, Umm al-Quwain, Ras al-Khaimah, and Fujairah. Of these, it is Dubai that got itself a head start “in transforming its economy and [that] presently acts as a gateway to the Arab world.”
GDP growth in the UAE was modest over the last year, 2.3 percent, and the equity markets declined.
The total wealth of the UAE’s UHNW individuals fell slightly (one-tenth of one percent) over the last year. The population of the group increased slightly. In essence though, the UAE, like Saudi Arabia, is in a holding pattern. Property values increased, though.
The Middle East as a whole witnessed an increase of its UHNW population 2.2 percent last year, while the combined wealth of that population shrank by 1.3 percent.
Some of the broad (not country or region specific) themes of the report are:
- That governments are trying to improve their own balance sheets, often at the expense of UHNWIs, who accordingly are seeking to limit their tax exposure “through a shift to territories with beneficial tax regimes.” Professionals who are dealing with this elite need to be conscious of this and to “consider strategies that reduce tax exposure and address their clients’ concerns.”
- That UHNW investors are quite risk averse, and accordingly are moving their investments into hard assets.
- That wealth management firms have to persuade clients of the long-time viability of investments in emerging markets, because that is the direction where there are growth prospects ahead.
Christopher Faille is a Jamesian pragmatist. William James has taught him, for example, that "you can say of a line that it runs east, or you can say that it runs west, and the line per se accepts both descriptions without rebelling at the inconsistency."