Asia-Pacific forecast to drive growth in global wealth

Fast-growing Asia-Pacific nations will drive a 61% increase in global wealth over the next five years to $315 trillion, Credit Suisse’s research institute has forecast.

In its inaugural global wealth report, the bank estimates there are currently 4.4 billion adults with total wealth of $195 trillion, which represents a 72% increase over the past decade.

This includes more than three billion individuals with wealth of $10,000 or less – the base and largest segment of the “wealth pyramid” (see graph, below) – who represent 68% of the people part of the equation but just 4% of the wealth part.

Importantly, the middle segment of the pyramid constitutes over a billion people with between $10,000 and $100,000, of whom 587 million, or almost 60%, are located in Asia-Pacific.

China stands out as the world’s third largest wealth generator with total household wealth of $16.5 trillion, behind the US ($54.6 trillion) and Japan ($21 trillion). If trends continue, household wealth in China is forecast to rise 111% to $35 trillion by 2015, outstripping Japan.

“The report confirms that Asia-Pacific countries, which now make up the bulk of the world’s middle class of emerging consumers, are driving the growth of the world’s wealth,” says Osama Abbasi, Credit Suisse’s Asia-Pacific CEO.

“China is the third-largest wealth market in the world. Economic expansion in other key markets in Asia-Pacific means that today growth in average household wealth per adult is up to 10 times the global growth rate.”

The middle and base segments of the pyramid in total represent $41 trillion, with wealth in fast-growing emerging economies expected to drive new trends in consumption and industrial change. China, Korea, Brazil and Taiwan are rising rapidly through this part of the pyramid, along with Indonesia and India.

“We believe that wealth provides people in the middle segment of the wealth pyramid with the financial security they need to become the world’s emerging consumers,” says Giles Keating, Credit Suisse’s global head of research for private banking and asset management. “The middle segment is therefore expected to replace indebted US households as the global growth locomotive.”

Total wealth in India has tripled in the past decade to stand at $3.5 trillion, while Indonesia’s has grown five-fold to $1.8 trillion. Based on current trends, India’s wealth is forecast to nearly double to $6.4 trillion, and Indonesia’s similarly to $3 trillion. Indonesia’s average wealth per adult has grown 384% to $12,112 since 2000 – the fourth fastest rate in the world.

Robust economic expansion has driven growth in household wealth in most Asia-Pacific countries of between 100% to almost 400%, far higher than the global growth figure of 42%.

Globally, household net worth per adult has risen from $30,700 in the year 2000 to $43,800 by mid-2010. Taking into account the depreciation of the dollar against most major currencies, if exchange rates are held constant, average net worth has increased 24%.

But Japan’s household wealth has risen just 5% in US dollar terms, all attributable to the appreciation of the yen.

The richest nations, with wealth in 2010 above $250,000 per adult, are Switzerland, Norway, Australia, Singapore and France. Japan fits into the next bracket of $200,000 along with the US, UK, and Canada.

Frontier wealth, the main transition nations outside the EU, including China, fall into the $5,000 to $25,000 range. The category below $5,000 comprises almost all of South Asia.

Overall, residents of Europe own 32% of global wealth, compared to 31% in North America and 22% in Asia-Pacific (excluding China and India due to the size of their populations, which account for 8% and 2% respectively).

Separately, the research found 24.5 million high-net-worth individuals (HNWIs) worldwide with wealth from $1 million to $50 million, of whom 22 million fall in the $1 million to $5 million range.

North America accounts for 11.1 million HNWIs, Europe for 7.8 million and 4.1 million reside in Asia-Pacific countries other than China and India. It estimates there are now more than 800,000 HNWIs in China (3.3% of total). India, Africa and Latin America together host the remaining 740,000 HNWIs (3%).

Meanwhile there are 81,060 ultra-HNWIs with net assets exceeding $50 million. North America dominates with 39,000 (48%), Europe hosts 22,000 (27%) and Asia-Pacific has 13,000 (16%), excluding China and India.

Recent fortunes created in China leads the researchers to conclude that 4,000 Chinese (5% of global total) now rank among the ultra-HNWI group, along with 3,500 (4.4%) of members from India, Africa and Latin America.