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China HNW Individuals' Wealth Seen Surging Towards 2020; Hong Kong, Singapore Are Costliest Places - Julius Baer
Tom Burroughes
29 October 2015
China’s economy may be slowing down, prompting its central bank to turn on the monetary taps, but the wealth of the country's high net worth individuals is expected to reach $8.249 trillion by 2020, three times the level of 2010, Julius Baer said in a report charting wealth trends in Asia. The report also looked at lifestyle trends in the region. With South Korea, HNW individuals’ wealth is expected to rise to just over $812 billion by 2020 from $540 billion in 2014. Korean economic growth has been steady since the 2008 financial crisis. This year, Korean nominal GDP is expected to contract nearly 10 per cent because of a depreciation in the Korean won against the dollar. In the Philippines, improving market conditions will boost the wealth of HNW individuals to $197 billion in 2020 from $121.6 billion in 2016. In Singapore, Julius Baer said the city-state should see a rise in HNW individuals’ wealth to around $603 billion in 2020, from $424 billion last year.
The Swiss bank, which regards Asia as its second home market, set out forecasts for 10 Asian markets over the next five years.
For example, it says wealth of HNW individuals in Hong Kong will reach $1 trillion, while Indian HNW individuals will have $2.3 trillion by 2020, up from $1.425 trillion in 2016.
“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, we maintain a very positive view for the region and believe in the fundamental strength of the economies, which will also further drive the growth of number of millionaires in Asia,” Boris Collardi, the bank’s CEO, said.
As far as China forecasts are concerned, Julius Baer's projections of wealth assume a nominal GDP growth rate of around 10 per cent between 2017 and 2020, boosted by expected appreciation of the Chinese currency versus the dollar throughout the forecasting horizon. While the renminbi declines in 2015, the longer term outlook points to an appreciation trend.
As far as Hong Kong goes, the bank said Hong Kong’s stock index performance has handsomely beaten that of Singapore’s, and it benefits from strong trade and economic links with China.
In India, the forecast is based on further signs that the country’s economy has gained momentum; on current trends, the gap in wealth between India and China will narrow.
“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 $8 trillion. Our forecasts reflect the belief and confidence that China has ample room to ease monetary and fiscal policy to both stabilise and boost the economy,” Thomas Meier, region head for Asia-Pacific, said.
“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,” Meier continued.
Other countries
Julius Baer said that for Indonesia, the wealth of HNW individuals, which was estimated at $154.9 billion in 2014, will rise to a little over $200 billion in 2020. A headwind has been that Indonesia’s stock market and currency have been under pressure since 2013 due to a persistently high current account deficit, high inflation and worries over stagnation in economic growth. The bank said that the country does, however, have the potential to spring a positive surprise because of a reform-minded government.
Malaysia’s HNW individual wealth is estimated to rise to $308 billion by 2020 from $195 billion in 2014. In the short run, political strife has cast doubt on the economic position but the longer-term expectation is for growth to be robust, aided by government projects, Julius Baer said.
Julius Baer forecasts Taiwan’s HNW individual wealth to grow at a modest but steady pace from $269 billion in 2010 to $533 billion in 2020.
Finally, in Thailand, the country will see HNW individual wealth rise to about $344 billion in 2020, up from $272 billion in 2014.
Lifestyle costs
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. The index showed that 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 . With possible devaluation of the renminbi, and interest rates cut to stimulate the market after a volatile summer in 2015, the bank expects some strong price movements next year.
Hong Kong and Singapore take second and third place overall. Hong Kong’s expensive cost for services and Singapore’s relatively expensive pricing for all goods and services establish these three cities as the most expensive cities to purchase the items.
The dominant feature in the Hong Kong data set remains high-end property. During the observation period of this year’s index, the data set increased 17 per cent year-on-year. Hong Kong remains in the top set for the price of residential property in the region.
Singapore remains the most expensive market for the car tracked in the index. This pricing is partially reflective of special car-related taxes. In comparison to other cities, Singapore is also relatively expensive to rent a hotel suite, stay in hospital, draft a will in terms of the legal fees, and buy residential property. During the data collection period there was zero change in the luxury high-end market of property in Singapore.
Mumbai is a regional relative bargain for the overall basket of services and goods, and is also the least expensive city in terms of ranking for goods.