Along with China, India has been the most consistent driver of wealth in the Asia-Pacific region, says a recent survey. The number of Asia’s high net-worth individuals grew 9.7% to 3.3 million, exceeding Europe for the first time
It’s official now. Asia’s wealth is growing faster than Europe, despite inflationary concerns and growing population. The 2011 Asia-Pacific Wealth Report released yesterday by Merrill Lynch Global Wealth Management & Capgemini says that this growth in wealth is an indication of the long-term fundamental strength of India’s economy, and rich individuals are increasing their exposure to equities, real estate, gems and jewellery.
Asia-Pacific’s population of high net-worth individuals (HNIs) grew 9.7% to 3.3 million in 2010, exceeding Europe’s for the first time and placing the region as the world’s second-biggest market after North America, according to the report. HNI wealth in India grew by 22% in 2009-10, amounting to $582 billion, as compared to $477 billion in 2008-09.
“India along with China has been the most consistent driver of Asia-Pacific wealth over the last couple of years,” said Atul Singh, head of Merrill Lynch Wealth Management in India. “Despite inflation being a concern, real GDP (Gross Domestic Product) of 9.1% and a 24.9% increase in market capitalisation, is an indicator of the long-term fundamentals of India’s economy remaining solid and will help investors withstand volatility ahead.”
HNIs are defined as those having investable assets of $1 million or more, excluding primary residence, collectibles, consumables, and consumer durables. Ultra-HNIs are defined as those having investable assets of $30 million or more, excluding primary residence, collectibles, consumables, and consumer durables.
India’s population of HNIs increased their exposure to equities, real estate, gems and jewellery in 2010, reflecting regained confidence even as the financial crisis subsided.
Indian HNI investment in equities went up to 36% in 2010 from 32% in 2009, while real estate moved up marginally to 23% in 2010 as compared to 22% in 2009. India’s HNIs have 36% of their holdings in equities, higher than the global average at 33 percent.
The penchant for investment in gems and jewellery continues for rich Indians. HNIs increased their exposure to gems & jewellery up to 37% in 2010 from 33% in 2009. Indian HNI exposure to fixed income, alternative investments and cash/deposits is more or less at the same level ranging from 26% in 2010 from 25% in 2009; 6% in 2010 from 8% in 2009 and 9% in 2010 from 13% in 2009, respectively.
“Asia-Pacific remains a region of enormous wealth creation—spearheaded by China, India and Japan—which continues to outpace global levels,” said Pradeep Dokania, chairman, Merrill Lynch Wealth Management India. “The increasing sophistication and demands of Asia-Pacific HNIs mean that those wealth-management firms that can leverage across their businesses are best-placed to better serve their clients’ needs.”
As the majority of Asia-Pacific HNIs source their wealth from business ownership, wealth-management firms that can generate enterprise value—the ability to leverage capabilities from across different business units—will be able to serve their clients better, says the study. More HNIs in Asia-Pacific than in other regions believe it is important for wealth-management firms to create enterprise value, such as leveraging corporate & investment banking resources, as their businesses progress through different stages.
“Within Asia-Pacific, the importance of enterprise value is perceived to be one of the highest in India,” said Salil Parekh, CEO, Applications Services-US, UK & Asia of Capgemini. “Implementing such (an) approach in (the) Asia-Pacific (region) will require a well-defined market strategy to capture market-specific opportunities, especially in fast-growing emerging markets, like India. Among the key components will be firm-wide accountability, appropriate incentives, and integrated IT. Most importantly, firms will need to hone their strategy for each market, and not impose arbitrary standards from highly-developed markets.”
This is the second straight year in which India’s HNI population growth has been among the top gainers, fuelled by strong macroeconomic growth and by market performance. As per the findings of the report, in 2010, India’s HNI population grew at 20.8% to 1,53,000 compared with 1,26,700 in 2009. India was among the eight of the 20 fastest-growing Asia-Pacific markets in HNI population—including Hong Kong, Vietnam, Indonesia and Sri Lanka.
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