Hong Kong has second-highest average wealth per adult globally
Global wealth grew during the past year by 2.6% to US$360 trillion, according to latest edition of Global Wealth Report
22 Oct 2019 | The Asset

Global wealth grew during the past year by 2.6% to US$360 trillion and wealth per adult reached a new record high of US$70,850, 1.2% above the level of mid-2018. The United States (US), China and Europe contributed the most towards global wealth growth with US$3.8 trillion, US$1.9 trillion and US$1.1 trillion respectively, according to the 10th edition of the Global Wealth Report published by the Credit Suisse Research Institute.

Hong Kong ranked 10th globally in terms of the number of ultra-high-net-worth (UNHW) individuals. There were 3,103 UHNW individuals in Hong Kong with over US$50 million in wealth, compared to 18,132 in China and 168,033 globally. Other key findings for Hong Kong are:

• The average wealth per adult is US$489,260, which is significantly higher than the global average of US$70,850.

• Median wealth per adult is at US$146,890, again significantly higher than the global average of US$7,087.

• Hong Kong accounts for at least 1% of high-net-worth (HNW) citizens worldwide at 516,000 and this number is expected to increase 36% to 700,000 in 2024.

Asia-Pacific region – highest contributor of wealth

Total household wealth in Asia-Pacific (including China and India) reached US$141,219 billion in mid-2019, compared to the global total wealth of US$360,603 billion, making Asia-Pacific the highest contributor out of all regions.

During the year, China and India reported increases of 3.1% and 5.2% of total household wealth, respectively. Total wealth rose in the other regions as well. North America added US$4.1 trillion to its household wealth, of which US$3.9 trillion came from the US.

Household wealth in Asia-Pacific is expected to grow by 33% to reach US$188,000 billion in 2024, while the global total is expected to grow by 27% in the same period to US$458,577 billion.

The number of millionaires in the region is expected to increase by 50% from 12.7 million in mid-2019 to reach 19.1 million in 2024. Meanwhile, the number of millionaires is forecast to rise by 34% globally, by 35% in Europe and 24% in North America by 2024.

The number of UHNW individuals in the Asia-Pacific region is expected to grow by around 21,300, or 8% annually, reaching a total of nearly 66,000 by 2024, of whom 42% will be from China. Meanwhile, annual growth of the UHNW segment is seen at 6.5% globally, 6.6% in North America and 6% in Europe.

While financial assets contributed 39% of the increase in gross wealth worldwide, non-financial assets grew faster than financial assets and accounted for the bulk of new wealth in China, Europe and Latin America, and almost all new wealth in Africa and India.

Switzerland and Hong Kong have highest average wealth globally

Globally, Switzerland is ranked top in terms of wealth per adult with US$564,650 in mid-2019, followed by the Hong Kong (US$489,260). Australia (US$386,060) and Singapore (US$297,870) follow in positions four and six, respectively, among major economies globally.

In terms of median wealth, locations with lower levels of wealth inequality continue to have higher median wealth per adult, with Switzerland (US$227,890) ranking the highest, and Australia (US$181,360) overtaking the Hong Kong (US$146,890) to gain second place. Other Asia-Pacific locations in the top ten globally are New Zealand, ranked fifth with US$116,440, and Japan, ranked sixth highest with US$110,410.

John Woods, Credit Suisse’s chief investment officer for Asia-Pacific, said: “Total wealth across all regions rose last year. In the 12 months to mid-2019, household wealth in Asia-Pacific, including China and India, grew at a steady rate of 2.4% to reach US$141,219 billion, almost 40% of the total global wealth, making it the biggest wealth region.”

“While the United States continues to top the world league table, with China in second place, the relative positions are likely to be eroded as we project a 23% rise in the number of millionaires in the United States, compared to a 55% increase to 6.9 million for China. Millionaires in India could number 1.2 million in 2024, representing an increase of 56% over the next five years. In terms of ultra-high net worth individuals, by 2024 the Asia-Pacific region will host another 21,300 UHNWIs, reaching a total of nearly 66,000, of whom 42% will be from China.”

10 years of the Global Wealth Report

This year the report also assesses the performance of countries in real rather than nominal values taking into consideration the effect of inflation.

• Emerging markets including China have become increasingly important to the world economy, accounting for two thirds of real wealth gain since 2008, or double the contribution of North America.

• China performs extremely well under real US dollar, current US dollar and Local Currency Unit (LCU) measures.

• Since 2008, average real US dollar wealth growth in Europe has been negative, in part due to retrenchment of the euro.

• High-income Asia-Pacific countries have only a small role in this changing scenario and the rest of the world (including most of Africa and Latin America) simply offsets the negative impact of Europe.

The report examines the ratio of wealth in relation to Gross Domestic Product (GDP), finding that in the longer term, the most successful countries are those that succeed in raising wealth as a multiple of GDP by addressing institutional and financial sector deficiencies. This can result in a virtuous cycle in which higher wealth stimulates GDP growth, which in turn further raises wealth. China, India and Vietnam provide examples of this virtuous cycle in action.

The global wealth pyramid 2019

To determine how global wealth is distributed across individual adults, the report combines estimates of the level of household wealth across countries with information on the pattern of wealth distribution within countries.

The wealth pyramid from the report captures the wealth difference between adults. The large base of low-wealth holders underpins higher tiers occupied by progressively fewer adults. An estimated 2.9 billion individuals – 57% of all adults in the world – have wealth below US$10,000 in 2019.

The next segment, covering those with wealth in the range US$10,000–100,000, has seen the biggest rise in numbers this century, trebling in size from 514 million in 2000 to 1.7 billion in mid-2019. This reflects the growing prosperity of emerging economies, especially China, and the expansion of the middle class in the developing world.

The average wealth of this group is US$33,530, a little less than half the level of average wealth worldwide, but considerably above the average wealth of the countries in which most of the members reside.

Wealth of women has risen due to their increasing labour force participation

Women’s wealth has grown relative to that of men in most countries due to rising female labour force participation, more equal division of wealth between spouses and other factors.

Traditionally, inheritance has been a more important source of wealth for women than for men, partly because lower incomes restricted accumulation on their own account, partly due to widowhood, and partly because females hold on to bequests longer than male heirs because they tend to live longer. The reduced flow of inherited wealth over the first half of the 20th century tended to lower the relative wealth of women due to their greater dependence on inheritance.

Parental financial assistance and inheritance may help millennials accumulate wealth

Millennials have not been a lucky cohort, according to the report. Not only were they hit at a young age by the global financial crisis, its associated recession and the poor job prospects that followed, but they have also been disadvantaged in many countries by high house prices, low interest rates and low incomes, making it difficult for them to buy property or accumulate wealth. While millennials may appear to suffer from many disadvantages, parental financial help and inheritance may come to their aid.

The expected surge in inherited wealth has consequences for wealth distribution and wealth inequality for developed countries and emerging economies alike. Inheritances are expected to have more significant wealth distribution consequences in the future, probably adding to the inequality pressures from other sources.

Nearly 1% of adults worldwide are millionaires

In mid-2019, 46.8 million millionaires, or 0.92% of the world’s adults, collectively owned US$158.3 trillion (44% of the global total). The US contributed more than half of the 1.1 million newly minted millionaires during the year up to mid-2019, as Japan and China added 187,000 and 158,000 new millionaires, respectively.

Since 2000, when millionaires made up just 0.37% of the adult population, China and other emerging markets have seen the fastest growth in millionaires. The increase is largely attributed to rising average wealth (78%), followed by population growth (16%) and increasing wealth inequality (6%).

Nannette Hechler-Fayd’herbe, chief investment officer international for wealth management and global head of economics and research at Credit Suisse, says, “Despite the trade tension between US and China over the past 12 months, both countries have fared strongly in wealth creation, contributing US$3.8 trillion and US$1.9 trillion respectively. The number of millionaires has also risen globally by 1.1 million to 46.8 million in 2019, collectively owning US$158.3 trillion or 44% of the global total. China and other emerging markets have contributed significantly to this growing contingent and show signs of progress and opportunity for investors.”