Global Financial Assets Up 10.4 Per Cent In 2021 – Allianz

Amanda Cheesley Deputy Editor October 17, 2022

Global Financial Assets Up 10.4 Per Cent In 2021 – Allianz

Allianz has released the 13th edition of its Global Wealth Report, which puts the asset and debt situation of households in almost 60 countries under the microscope.

Allianz's Global Wealth Report 2022 finds that the growth of global financial assets was up by 10.4 per cent in 2021, reaching €233 trillion ($227 trillion), showing a rise for a third year in a row, but 2022 will mark a turning point. 

The report states that private wealth has increased by €60 trillion in the last three years. 
Three regions stood out in asset growth: Asia ex Japan (+11.3), Eastern Europe (12.2 per cent) and North America (+12.5 per cent). 
The main growth driver was the stock market boom, contributing around two thirds to wealth growth in 2021 and propelling the asset class of securities (+15.2 per cent), the report adds. Fresh savings, however, remained elevated. Despite dropping by around 19 per cent in 2021, they came in at 40 per cent above the level seen in 2019, the report states. 

The composition of savings, too, changed, albeit slightly. Bank deposits’ share fell but with 63.2 per cent they remained by far the preferred asset class of savers, the report says. On the other hand, securities as well as insurance and pensions were favored by savers, but their shares in fresh savings were much smaller, with 15.5 per cent and 17.4 per cent, respectively, the report adds. 

Reflecting these dynamics, global bank deposits grew by 8.6 per cent in 2021, the second largest increase on record. Insurance and pension fund assets showed weaker development, rising by 5.7 per cent, it says.

Turning point in 2022
Nevertheless, the report states that 2022 marks a turning point. The war in Ukraine choked the recovery post Covid-19 and turned the world upside down. Inflation is rampant, energy and food are scarce, and monetary tightening has squeezed economies and markets. Households’ wealth will feel the pinch. 

According to the report, global financial assets are set to decline by more than 2 per cent in 2022, the first significant destruction of financial wealth since the Great Financial Crisis in 2008. In real terms, households will lose a tenth of their wealth. But in contrast to the GFC, which was followed by a relatively swift turnaround, this time the mid-term outlook is rather bleak. Average nominal growth of financial assets is expected to be at 4.6 per cent until 2025, compared with 10.4 per cent in the preceding three years, the report states.
“2021 brings an era to an end,” Ludovic Subran, chief economist at Allianz said. 

“The last three years were nothing but extraordinary. It was a bonanza for most savers. Not only 2022 but the coming years will be different. The cost-of-living crisis puts the social contract to the test. Policymakers face the enormous challenge to master the energy crisis, secure the green transformation and spur growth while monetary policy hits the brakes hard. There is no more room for policy mistakes. Key for success are innovative and targeted measures at the national, and European unity at the supranational level,” he added.
The return of debt
At the end of 2021, global household debt stood at €52 trillion, the report says. The annual increase of +7.6 per cent vastly outpaced the long-term average of +4.6 per cent and 2020’s growth of +5.5 per cent. 

The last time higher growth was reached was in 2006, well before the GFC, the report adds. However, due to the sharp increase in nominal output, the global debt ratio (liabilities as a percentage of GDP) fell to 68.9 per cent. The geographic allocation of debt has changed since the last crisis. While the share of advanced markets is in decline, the US share, for example, has dropped by 10 percentage points to 31 per cent since the GFC, the report adds. Emerging economies account for an ever-rising portion of global debt, first and foremost Asia (excluding Japan): its share has more than doubled over the past decade to 27.6 per cent, the report states.
“The sharp increase in debt at the onset of a global recession is worrying,” said Patricia Pelayo Romero, co-author of the report. 

“In emerging markets, households’ debt has increased with double-digit growth rates over the past decade, more than five times the speed seen in advanced economies. Still, overall debt levels seem manageable, but given the strong structural headwinds these markets are facing, there is a real threat of a debt crisis,” she added.
Asia: region of two speeds
Nevertheless, gross financial assets of Asia’s private households increased by 9.4 per cent in 2021. The development was dominated by China and Japan, whose private households held 51 per cent and 25 per cent of the region’s gross financial assets respectively, the report states. 

While in China gross financial assets increased by 12.2 per cent, Japan’s private households recorded a plus of 4.2 per cent. If Japan is not included in the calculation, total gross financial assets rose by 11.3 per cent in the region. 

These two countries are exemplary for Asia, which is still a region of two speeds, the report states. On the one hand, where double-digit financial assets' growth is mainly attributable to backlog demand, like Cambodia, India, Sri Lanka and the Philippines for example, and on the other, mature markets with less dynamic growth, such as Singapore, South Korea or Taiwan.
Just as in other parts of the world, securities recorded the strongest growth of all asset classes with 13.5 per cent, the report adds. Second in terms of growth were insurance and pension assets, which increased by 8.1 per cent, and third bank deposits with a plus of 7.7 per cent. However, the latter remained the dominating asset class in Asia’s private households’ gross financial assets portfolio with a share of 48.9 per cent, the report states. Securities regained in popularity and accounted for 31 per cent at the end of 2021, while the share of insurance and pension assets continued to decline to 18.4 per cent.
“Early pension savings withdrawals and lowered pension fund contribution rates during the Covid-19 pandemic to ease the financial impact of the pandemic left a mark in private households’ asset portfolio. The consequences will only be felt in the long run, since many savers especially in the low-income bracket, will have difficulties to fill this gap by the time they reach retirement age,” Michaela Grimm, co-author of the study, said.
While gross financial asset growth had slowed down slightly compared with the year before, liabilities' growth accelerated to 10.3 per cent in 2021, the report adds. 

In the group of Asian countries except Japan, loan growth was even higher amounting to 12.2 per cent, it states. This development was mainly caused by the ongoing price increases on the housing markets. At the end of 2021, the debt-to-GDP ratio in Asia reached a record-high of 62.6 per cent, excluding the debt of Japan’s private households, it was only slightly lower with 60.6 per cent, the report adds.
Net financial assets increased by 9.1 per cent and were slightly weaker than gross financial assets since Asia’s private households’ liabilities had grown stronger than their gross financial assets during 2021, the report states. 

However, with Japan excluded from this calculation, net asset growth in the region was 11 per cent. If Asia was a country, it would rank 36th in the firms ranking, with net financial asset per capita amounting to €11,780, although three Asian markets, Taiwan, Singapore and Japan, are among the 20 markets with the highest net financial assets per capita worldwide, the report states. 

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