Number of Wealthy People In Asia Surpasses Those In US and Canada

A more interesting issue may be whether this accumulation of wealth is sustainable given Asia's penchant for leverage and the recent declines in the Chinese economy. JL

Gregor Hunter reports in the Wall Street Journal:

The region nudged ahead of the total number of millionaires in the U.S. and Canada by a margin of 6,400.

A study shows that the Asia-Pacific region had more rich individuals than North America last year, retaking the top spot for the first time since 2011.

Thanks to rising wealth in China, India, Indonesia and Thailand, the region had more millionaires than the U.S. and Canada, according to the study released by consultants Capgemini CGEMY -2.71 % and RBC Wealth Management. Asia’s wealthy tend to also keep more of their money in cash, while also borrowing more than peers in North America.
The rise in Asia’s wealth has been spurred by an economic boom in China, but since the survey was conducted between December and February, it doesn’t reflect the effects of China’s stock-market turmoil over the summer. Chinese stocks more than doubled over the year until June, when a selloff followed by a government-engineered rescue rattled global markets.
“Time will tell as we move into the next couple of months whether there’s a longer-lasting impact on wealth growth in China,” said David Wilson, head of Capgemini Financial Services’ strategic analysis group. “The jury’s still out with three months to go.”
The study found that the numbers of high-net-worth individuals—defined as those with investible assets of more than $1 million—rose 11.4% to 4.672 million in Asia-Pacific, the fastest rate of growth recorded in the study, which polled 5,100 people world-wide. The region nudged ahead of the total number of millionaires in the U.S. and Canada by a margin of 6,400.

North America still has more money, however. Its 28.8% share of the $56.4 trillion of global wealth held by high-net-worth individuals compares with 28.1% in Asia-Pacific and 23% in Europe.

Asia’s millionaires also tend to hold more cash than the global average. Investors in Asia-Pacific had more cash at the start of this year than any other asset class, accounting for 23.1% of balance sheets outside of Japan, where the figure was 37.1%. Demand for credit to fund investments also was high, with credit accounting for 25.5% of assets, compared with 18.2% globally, said Barend Janssens, head of RBC Wealth Management.
He said investors in Asia were much more likely to use leverage than in other markets, with local brokers being more willing to extend credit than in developed markets and private banks chasing freshly minted elites as new clients.
Leverage “has always been very high in Asia compared to other markets,” Mr. Janssens said. Because many wealthy individuals are also business owners, they often felt “quite comfortable” using credit.
“Cash remains the largest asset class in Asia-Pacific ex-Japan, sitting apart from the rest of the world where equities are dominant,” he added. “It’s normally an indication of volatility in the market. Clients are using it to limit risk.”
The growth in Asia’s wealth has been driven by an economic boom during the last decade as China’s economy took off following the financial crisis that struck the region’s economies in the late 1990s.
“One of the persistent effects of the Asian financial crisis was a sharp drop in investment rates and a swing from current-account deficit to current-account surplus across the board,” said Tim Condon, chief economist for Asia at ING in Singapore.
China was an exception, where high domestic savings rates were funneled into investments in manufacturing—which has caused severe overcapacity issues in domestic industry and a prolonged effort by Beijing to rebalance the economy toward consumption. Whether high levels of savings will persist in Asia-Pacific in the decades ahead is another story, as legions of workers start to retire. A working paper released by the National Bureau of Economic Research on Monday projected savings rates in China could decline by around 12% between now and 2050 as the working-age population peaks.