The Millionaire Club-Are you In or Out?

Sad stories not only affect the poor. They also puncture the ego of the rich. And so as it goes, the global recession has also trimmed down the inclusive numbers in the Millionaire Club.

A Straits Times report circa Oct 14 unequivocally tells the story.

"The Asia-Pacific millionaires club has taken a hit in the face of the global economic downturn.

The number of high net worth individuals (HNWIs) in countries such as Japan, China and Australia — those who hold at least US$1 million (RM3.39 million) in investable assets — shrank by 14.2 per cent to 2.4 million last year, according to the Asia-Pacific Wealth Report released by Merrill Lynch and Capgemini yesterday.

Their wealth shrank 22.3 per cent to US$7.4 trillion.

As for the super-rich, the financial crisis dealt an even larger blow to their wealth. The report said that the ultra-high net worth individuals, with investable assets of at least US$30 million, saw their wealth shrink 35.1 per cent.

Those belonging to this well-heeled group in Asia-Pacific numbered 14,300 — a fall of 29.6 per cent. Japan, China and Australia are home to about three-quarters of Asia-Pacific’s high net worth individuals.

Japan has the biggest number of these individuals, with 1.37 million HNWIs, followed by China with 364,000.

The publication reports that wealthy Asians have staged a flight to safety in the face of economic uncertainty, allocating their wealth to ‘safer’ cash-based investments and demonstrating a lower appetite for riskier asset classes.

They have also favoured more familiar territories, choosing to invest in home regional markets instead of markets in Europe or North America.

Arvind Sundaresan, head of sales for Asia-Pacific at Capgemini’s financial services global business unit, said: “As markets recover and risk appetite returns, we expect Asian-Pacific (high net worth individuals) to adopt a more balanced investment approach and gradually increase their allocations to other regions.”

The report predicts that growth in Asia-Pacific’s wealth will pick up as market conditions improve. The region’s economies have shown signs of recovery and are forecast to grow at more than twice the pace of the global economy next year, it states.

The combined wealth of Asia-Pacific’s millionaires is estimated to grow at an annual rate of 8.8 per cent until 2018, faster than the global average of 7.1 per cent, the report said.

This increase will be led by China and India and will be fueled by their robust domestic consumption and growing number of affluent individuals.

In Singapore, the combined wealth of its millionaires shrank 29.4 per cent to US$272 billion during the year — the third-largest erosion of wealth in the region after Hong Kong and Australia.

In Singapore, cash-like assets rose 11 per cent to 33 per cent last year as investors headed to safer ground after regional stock markets plummeted.

Almost a quarter of the financial assets of local HNWIs were found to be in real estate last year.

However, a 5 per cent decline in the value of assets allocated to real estate is forecast by next year as market uncertainty causes investors to remain on the sidelines.

Despite the local stock market rallying almost 50 per cent since the beginning of this year, head of Singapore and Malaysia research at Merrill Lynch, Melvyn Boey, said that wealth generation through the stock market had a way to go before it reached its peak.

“With the assumption that portfolio wealth remains the same across asset classes, it is a reasonable assumption that the wealth of high net worth individuals is not back at levels we saw at the peak prior to the financial crisis,” he said.

Boey added that a recovery of 100 per cent was required before the local stock market returned to the position it occupied prior to the economic downturn.

He has seen a return to asset classes such as equity and fixed income and a decrease in the popularity of cash-based assets although investors still remain cautious.

Merrill Lynch anticipates 6.5 per cent real GDP growth for Singapore next year, citing positive investor sentiment and continued capital inflows".