CLSA forecasts the number of wealthy Asians to reach
2.8 million or 140% growth by 2015
Appreciating Asian currencies will boost their buying power
8 September 2011
Hong Kong – Thursday, 8 September 2011 – CLSA Asia-Pacific Markets (“CLSA”), Asia’s leading independent brokerage and investment group, launches “Fat cats in fast lanes: Surge in high net worth individuals” report, examining the surge of wealth in the region. The report finds that there are 1.2 million high net worth individuals (HNWI) in Asia as of 2010, and the burgeoning group is forecasted to grow to 2.8 million, equivalent to a 140% increase, by 2015.
The report analyses wealth distribution in 10 Asian economies: China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan, and Thailand. These countries are estimated to have 1.2 million HNWIs, defined as those with investible assets of US$1 million or more, excluding their first homes. These HNWI comprise only 0.06% of the adult population of the surveyed countries. For developed markets such as Singapore and Hong Kong, HNWIs represent 1.5% of their adult populations. While Korea and Taiwan, with income levels half of the USA, have eight times the ratio of HNWIs compared to China and 20 times relative to India and Indonesia.
Over the coming years, China will comprise the largest increase in wealth for the region. The report’s author, Amar Gill, Head of Special Projects Research at CLSA, anticipates China will account for 60% of the rise in HNWI’s wealth over the next five years, while Indonesia will have the fastest HNWI growth at 25%, versus 22% for China.
Drivers for wealth explosion differ across nations and are mainly explained by three main factors: increase in savings as a function of economic growth; return on assets from the yield and appreciation in capital values. Meanwhile, the rise of Asian exchange rates adds to Asians’ spending power for internationally priced goods. The report estimates that a 4% Asian-currency appreciation against the US dollar will account for one-third of the increase in HNWIs by 2015.
Gill says: “The forces for wealth creation are extremely favourable for Asia over the coming years. The economies are growing faster than any other region in the world. Savings ratios are high and appreciation is a big driver of wealth. As Asia gets richer, the surge in wealthy Asian spending power will become a multi-decade theme.”
Businesses that create positive economic value with a durable competitive advantage are expected to outperform. Key sectors to benefit from the wealthy boom include asset management, autos, consumer, healthcare, leisure and property. With some US$600 billion of stocks, these sectors will be buoyed by the wave of wealth.
Nevertheless, there are underlying risks. Asian economies are extremely volatile to outside markets and a global downturn, slowdown in China’s growth, an unexpected dollar rally could hinder Asian wealth expansion. Gill’s analysis indicates the projections are much more sensitive to currency and GDP growth than stock market returns. It is important to realize that Asia’s rich generally have a larger part of their wealth in properties than equities.
Amar Gill will present his findings the upcoming 18th CLSA Investors’ Forum in Hong Kong, from 19th–23rd September. The Forum will be attended by more than 1,500 institutional investors from 30 countries and more than 300 senior executive from 200 listed companies.
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