Ris­ing power of Asia as a hub for wealthy

Financial Chronicle - - FRONT PAGE -

The Knight Frank Wealth Re­port pro­vides an in­sight into the world of the su­per rich and their choices. It high­lights global prop­erty in­vest­ment op­por­tu­ni­ties while also show­ing that ed­u­ca­tion is in­cred­i­bly im­por­tant to ul­tra-high net-worth in­di­vid­u­als or UHNWIs, with the num­ber of chil­dren be­ing sent over­seas for their school­ing in­creas­ing year on year. There is also a high­light on the dis­tri­bu­tion of the world’s pop­u­la­tion of demi-bil­lion­aires – those with over US$500 mil­lion in net as­sets — and finds that Asia is lead­ing the way

In four years’ time, there will be more demi-bil­lion­aires in Asia than in North Amer­ica. Wealth data spe­cial­ist Wealth-X pre­dicts that there will be al­most 3,000 people based in Asia who have more than US$500 mil­lion in as­sets by 2022, echo­ing one of the key themes from The Wealth Re­port – the in­creas­ing power of Asia as a wealth hub.

Strong global eco­nomic growth as well as ris­ing as­set prices will boost the num­ber of demi-bil­lion­aires world­wide to 9,570 in 2022, up from 6,900 at the end of 2017. But, de­spite Asia’s growth, the US will re­main the coun­try with the big­gest over­all pop­u­la­tion of demi-bil­lion­aires, ex­pected to rise from 1,830 to nearly 2,500 by 2022. In China, the num­ber will climb from 490 to 990, Wealth-X pre­dicts.

The path so far in 2018 has not been smooth, with in­creas­ingly tense dis­cus­sions on trade be­tween the US and China, po­lit­i­cal un­cer­tainty in the UK and some parts of the EU and in­ter­est rates ei­ther al­ready ris­ing or set to do so.

Nev­er­the­less, the global econ­omy con­tin­ues to grow strongly, with the IMF fore­cast­ing 3.9 per cent growth this year and next, up from 3.8 per cent in 2017 and 3.2 per cent in 2016. The Econ­o­mist In­tel­li­gence Unit summed up the sit­u­a­tion in a re­cent re­port: “There has ar­guably never been a greater dis­con­nect be­tween the ap­par­ent strength of the global econ­omy and the mag­ni­tude of geopo­lit­i­cal, fi­nan­cial and op­er­a­tional risks that or­gan­i­sa­tions are fac­ing.”

Cer­tainly many stock mar­kets are per­form­ing strongly. While there was a tur­bu­lent start to the year in the UK and Europe, mar­kets have now re­gained the highs seen at the end of 2017. In the US, the stock mar­ket con­tin­ues its bull run. So what does all this mean for ul­tra-high net-worth in­di­vid­u­als or UHNWIs?

“There has been a sta­bil­i­sa­tion in the growth of ul­tra-wealthy in­di­vid­u­als,” says Win­ston Ch­ester­field, Di­rec­tor of Cus­tom Re­search at Wealth-X. “Mar­ket volatil­ity has de­creased, and the equity and bond per­for­mance seen in 2017 has cre­ated a sense of con­fi­dence. This has aug­mented the trend to­wards more en­tre­pre­neur­ial spend­ing among the ul­tra-wealthy, es­pe­cially in emerg­ing economies.

“It is too early to say how UHNWIs will re­act to the po­lit­i­cal events of 2018 so far – but our data show that they tend to take a longer view. The vast ma­jor­ity of UHNWIs are en­trepreneurs and, as such, have dealt with ad­verse busi­ness con­di­tions be­fore. As a re­sult, they are pre­pared to take a more bal­anced view in pe­ri­ods of un­cer­tainty or am­bi­gu­ity.”

Money on the move

One of the crit­i­cal is­sues in The Wealth Re­port is where money is com­ing from – and where it’s go­ing to. These move­ments help to drive both res­i­den­tial and com­mer­cial prop­erty mar­ket per­for­mance glob­ally. This is done by us­ing data col­lected by the Bank for In­ter­na­tional Set­tle­ments (BIS). The 2018 edi­tion of The Wealth Re­port pro­vides an anal­y­sis of BIS data on the level of de­posits from in­di­vid­u­als, cor­po­rates and gov­ern­ments by lo­ca­tion of ori­gin. The num­ber of lo­ca­tions that re­port to the BIS on an ag­gre­gate level has risen to 31, while those re­port­ing on a lo­ca­tion-by-lo­ca­tion ba­sis has risen to 29, help­ing to pro­vide a more com­pre­hen­sive over­view.

The level of de­posits held over­seas around the world is in­creas­ing. The to­tal level of cross-bor­der de­posits re­ported at De­cem­ber 2017 was US$6.4 tril­lion, US$632 bil­lion higher than was re­ported in De­cem­ber 2016.

De­spite the rise in po­lit­i­cal un­cer­tainty and un­knowns sur­round­ing Brexit, the UK saw the largest in­flow of over­seas de­posits by some mar­gin. The level of de­posits re­ported rose to US$1.8 tril­lion in De­cem­ber 2017, a cur­rency-ad­justed an­nual net in­flow of US$239 bil­lion.

The sec­ond most pop­u­lar des­ti­na­tion was France, with an an­nual ad­justed net in­flow of US$89 bil­lion. This in­flux could be partly at­tributed to the pop­u­lar­ity of Macron’s gov­ern­ment at the end of 2017, restor­ing faith in the French econ­omy. Tai­wan main­tained its po­si­tion, com­ing in third with an an­nual net in­flow of US$12 bil­lion, a fact that can be at­tributed at least in part to its be­ing out­side the re­mit of the CRS.

The coun­try that saw the largest in­crease of de­posits held out­side its bor­ders was the US. Over the course of 2017, it was the largest ori­gin for de­posit out­flows, de­posit­ing an ad­di­tional US$220 bil­lion across the re­port­ing lo­ca­tions. The most pop­u­lar des­ti­na­tions for these funds were the UK, France and Canada. Hong Kong was also a sig­nif­i­cant source of funds, adding US$40 bil­lion to the de­posits held in other re­port­ing lo­ca­tions over 2017, the big­gest re­cip­i­ents be­ing the UK, Ma­cau and the US.

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