Julius Baer has released its fifth annual Wealth Report: Asia, which monitors the cost of living in luxury and wealth creation in Asia. It finds that in Asia, Julius Baer’s second home market, the pool of investable assets held by High Net Worth Individuals (HNWI) could reach USD 14.5 trillion by 2020, or a growth of 160% in the current decade.
In addition to the Julius Baer Lifestyle Index, which was launched in 2011 tracking the costs of goods and services for HNWI in 11 Asian cities, this year’s report includes forecasts of HNWI wealth creation trends in ten Asian markets for the next five years until 2020. Despite its maturing economy, China’s HNWI wealth is expected to increase to USD 8,249.6 billion in 2020, trebling the 2010 figure and making it one of the biggest wealth creation engines in the region. The Philippines and India are also ranked in the top three in terms of HNWI wealth creation.
Boris F.J. Collardi, Chief Executive Officer of Bank Julius Baer, said: “For the first time since 2011, we revisit the growth of millionaires in Asia. Whilst we have tempered our optimism as to the rate of growth, there is still much reason to look to Asia as the greatest garden to grow millionaires. These findings also support our belief that wealth management is clearly a growth industry, with wealth set to continue its upward trajectory in Asia.”
China and India, in good shape
HNWI wealth is projected at USD 5.1 trillion in 2016, rising to USD 8.25 trillion billion by 2020. The projections of HNWI wealth are based on the assumptions of nominal GDP growth of around 10% between 2017 and 2020, boosted by expected appreciation of the Chinese currency versus the USD throughout the forecasting horizon. While the Renminbi (RMB) declines in 2015, the longer term outlook points to an appreciation trend.
Hong Kong’s HNWI wealth is expected to rise steadily to USD 1 trillion by the end of the decade. In recent years, Hong Kong’s stock index performance has been considerably better than that of Singapore’s stock market index. Further, Hong Kong benefits from strong trade and economic linkages with China. Hence, it comes as no surprise that, even as its nominal GDP rises 42% from USD 228.6 billion in 2010 to USD 325.3 billion by 2016, the HNWI wealth rises 56% from USD 484 billion to USD 756.3 billion in the same period.
About India, HNWI wealth is forecasted at USD 1.425 trillion in 2016, rising to USD 2.3 trillion by 2020. India’s nominal GDP growth is projected to rise only by 3.2% this year due to the depreciation of the local currency versus the USD. However, the Indian economy has now found its footing and is in a period of positive development. Thus, India’s HNWI wealth in USD is projected to rise by 94% between 2014 and 2020 (versus 74% for China). If this trend persists for a decade or more, India will narrow the wealth and economic gap with China.
Thomas R. Meier, Region Head Asia Pacific of Julius Baer, said: “Notwithstanding slowing global conditions, we remain positive on the trajectory of Asian HNWI wealth led by China where we estimate a tripling of HNWI wealth this decade to more than USD 8 trillion. Our forecasts reflect the belief and confidence that China has ample room to ease monetary and fiscal policy to both stabilize and boost the economy. We also see great catch-up potential in India where we expect economic expansion to strengthen from next year. India has the potential to narrow the wealth and economic gap with China over the next decade.”
Julius Baer Lifestyle Index 2015
The Julius Baer Lifestyle Index compares 20 goods and services items in 11 cities, covering Hong Kong, Singapore, Shanghai, Mumbai, Taipei, Jakarta, Manila, Seoul, Kuala Lumpur, Bangkok and Tokyo. In 2015, the most expensive and best bargain cities as determined by the index are identified clearly for the first time.Shanghai is the overall most expensive city in the 2015 study, topping the tables for services and goods and the overall category. Shanghai was within the top four most expensive cities in 13 out of the 17 compared categories (excluding wine, university and boarding school). With possible devaluation of the RMB, interest rates cut to stimulate the market after a volatile summer in 2015, we expect some strong price movements next year.
Hong Kong and Singapore take a respectable second and third overall. Hong Kong’s expensive cost for services and Singapore’s relatively expensive pricing for all goods and services, firmly establish these three cities as the most expensive cities to purchase the items in the Julius Baer Lifestyle Index.
This year’s report also features dedicated sections on India and Japan. A positive outlook for HNWI wealth is projected in India in the years ahead, in contrast to the relative stagnation in HNWI wealth between 2011 and 2013. Therefore, it retains promise and attractiveness for wealth management institutions over the next half decade, if not longer.
A positive evaluation is held of Japan’s economy and outlook – despite the fact that the overall growth of the market should not be expected to increase much beyond 1.5% per year anymore. Overall growth will be slowed down by demographic decline and underperformance of entire regions outside the city centres. Within its urban growth centres, however, new services are thriving, already strong social infrastructure is being upgraded and restructured corporations have returned to profitability. This will also be the basis for Japan claiming a greater economic role in Asia again.