Wobbly economies that shook up markets in 2011 took their toll on the world’s rich, though fast-growing Asia for the first time had more millionaires than North America. According to the report, the global personal wealth of people worth $1 million declined in 2011 for the second time in four years, a side effect of the Eurozone crisis and economic sluggishness in developed markets. Several emerging markets also suffered, with the number of millionaires in India and Hong Kong falling by nearly 20 percent. With Europe’s debt crisis bedeviling the continent, the outlook for wealth creation in 2012 remains weak, according to a report prepared by Capgemini and RBC Wealth Management.
The world’s millionaires grew by 0.8 percent to a record 11 million, according to the report, yet their collective wealth fell by 1.7 percent to $42 trillion. Only the Middle East experienced no decline in wealth. It was the first global decline in millionaire wealth since the 2008 financial crisis, when the ranks of the wealthy fell 15 percent and their wealth declined by 20 percent.
Families worth $30 million or more saw their collective wealth fall 4.9 percent and their ranks shrink by 2.5 percent to just 100,000 individuals. This decline reflects holdings in higher-risk and less liquid investments like hedge funds, private equity and real estate.
“It was a challenging environment for our clients,” George Lewis, global head of wealth management at Royal Bank of Canada, said. The Toronto banking giant began sponsoring the widely watched report in May. Lewis pointed out that the number of high net worth individuals rose even as overall wealth fell. “It at least suggests there continues to be upward mobility and the ability to generate wealth around the world,” he said.
Curious about how many millionaires live in nations around the world? Read this: Singapore toppled Hong Kong as home to Asia’s wealthiest in 2011 as declining stock markets hit the former British territory significantly harder than its Southeast Asian rival. Hong Kong, whose stock market capitalization fell by 16.7 percent last year, saw a bigger decline in the ranks of people with more than $1 million to invest as a larger proportion of that wealth was tied up in equity. Southeast Asia also has shown stronger signs of resilience to global turmoil than the rest of Asia as domestic spending offset struggling exports. The number of millionaires in Hong Kong fell 17.4 percent to 83,600 last year, compared with a decline of 7.8 percent to 91,200 people in Singapore, according to RBC Wealth’s head of emerging markets Barend Janssens. Hong Kong took the lead from Singapore in 2010 after falling behind in 2008.
China still is home to the most high net worth individuals in Asia Pacific, with a population of 562,000 millionaires. The top five countries by population of high net worth individuals are the US (3.07 million), Japan (1.82 million), Germany (951,000), China and the United Kingdom (441,000). According to RBC, this significant concentration of high net worth individuals is why wealth managers are attracted to Asia even if they have to contend with competition from domestic banks.
Are the troubles in the Eurozone likely to impact Asia? Lessons learned from the 2008 financial meltdown show that while Asia tends to get hit when the world economy stumbles, the severity varies depending on which countries have the biggest trade and financial linkages, and are best-prepared with big currency reserves, overflowing government coffers and central banks with the ability to cut interest rates. Generally speaking, Asia has more room than the West to react with interest-rate cuts and government spending. But some things have changed since 2008, and some countries, primarily India, Vietnam and Japan, may not be in shape to survive another financial jolt. “As we saw with Lehman, when you get a seizure in the global financial system, nobody can hide from that in the short run,” said Richard Jerram, chief economist at the Bank of Singapore. In that type scenario — which analysts say could still occur if Greece doesn’t live up to its commitments and leaves the Euro, or Spain and Italy require a bailout that Europe can’t afford — Asian stocks and currencies would fall, shipping lanes would see less business, and lending to consumers and businesses would dry up, slowing world economies.