will be increasingly matched by the coming stars of the developing
world in terms of rising household wealth over the next 10 years.
China, Russia and India are poised to overtake some of the world’s
most advanced countries.
The number of countries with more than one million
dollar-millionaires will increase from seven to 12 in 2017 predicts
a new Household Wealth Index, developed by Barclays Wealth and the
Economist Intelligence Unit (EIU) to track how the global
distribution of household wealth will change over the next 10
years.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
The index is claimed to be the first forward forecast of its kind
predicting the future spread of wealth across 50 countries.
By 2017 the number of high net worth households in excess of $1
million in the top ten wealthiest countries will almost double to
62.8 million – compared to just 34.5 million in 2007. Their
combined wealth will exceed $154 trillion. The number of households
in excess of $5 million in these 10 countries will reach a
staggering 5.2 million within 10 years, compared to two million in
2007.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataThe report asserts that while the US will remain at the top of the
index, a number of the emerging markets will perform strongly over
the next 10 years.
Most significantly, China will accelerate from 7th to 3rd place in
the overall wealth rankings. India will jump from 14th to 8th place
and Russia is catapulted from 19th place to 11th place – meaning
that it is on the verge of becoming one of the top 10 wealthiest
countries.
Brazil is not far behind, moving from 15th place to 12th by 2017.
The success of the developing markets will see developed economies
like Australia and South Korea move down in the rankings (from 10th
to 16th and 12th to 15th respectively).
Strong performances are predicted from the “maturing economies” of
Turkey, rising from 32nd to 26th place and Malaysia (from 35th
position to 28th). Again, the success of newer markets will cause
the displacement of historically stronger countries, such as
Norway, which will reposition from 27th to 31st, the report
forecasts.
Michael Dicks, Head of Research at Barclays Wealth, said: “The
Household Wealth Index clearly shows the gap closing between the
established economic superpowers and the rising stars in terms of
wealth creation in just 10 years time. By 2017 China, Russia and
India will overtake some of the world’s most developed countries,
and this suggests it is no longer accurate to label these as
‘emerging’ and ‘developing’ economies.”
The index authors find that regulatory change and deepening capital
markets are offering households in the new leading wealth centres a
more diversified range of investment options. Looking at financial
allocation in China, equities have increased from 10 percent in
2004 to 16 percent in 2007. In Russia stocks have increased from 49
percent to 66 percent and in India from 60 percent to 69 percent.
By contrast, allocation to equities in the US, UK and Germany has
remained constant over the same period.
That said, the rapid rate of growth and often spectacular returns
from local equity and real estate markets has attracted a new and
often inexperienced investor public. Using China as an example, the
economy grew by 10.2 per cent in 2007. As a result many wealthy
Chinese have no desire to diversify their holdings into other,
slower-growing international markets, when in recent years they
have typically been enjoying, for example, 10-15 per cent returns
on their local property markets. This home bias and undiversified
approach to the allocation of assets is a common characteristic of
countries including China, Russia and India, the report
observes.
With the development of local capital markets and growing appetite
among investors to participate in their countries’ economic growth,
Gerard Aquilina, Head of International Private Banking at Barclays
Wealth, believes that education is key. “Either through the
financial services industry or the government, investor education
is absolutely essential to avoid over concentration in any one
particular asset class,” he says.
Dollar millionaires
Twelve countries will be home to more than one million
dollar-millionaire households in 2017, compared to seven currently.
The US has a significant lead with an estimated 30 million
dollar-millionaire households expected in 2017 – a growth rate of
81 percent from 16.6 million last year.
Countries with the highest percentages of dollar-millionaires will
remain consistent over the next 10 years. The small, heavily
populated financial centres such as Hong Kong, Singapore and
Switzerland will still top the wealth rankings in 2017.
Countries rising through the ranks in terms of density of
millionaires include Japan, Denmark and the Netherlands, along with
Brazil and Turkey further down the table. The density of
millionaires in China will remain mostly unchanged over the next
decade, causing it to drop in ranking.
Despite considerable progress in the new index, developing markets
are still some way behind in terms of volume of
dollar-millionaires. The research shows that in 10 years from now,
the developed economies will continue to provide the most
significant opportunities for companies that wish to target a high
net worth audience.
The clout of the BRIC nations may be increasing, but the US will
remain unchallenged in the wealth rankings, the report finds. It
currently has 16.6 million households with overall wealth in excess
of $1 million and this figure is expected to increase to 29.7
million by 2017. Over the next decade, the US will also see the
number of households with wealth in excess of $5 million increase
from 1.4 million to 3.5 million. No other country comes close to
this kind of increase.
Its high net worth households (those with wealth in excess of $1
million) currently wield a colossal $39.8 trillion of wealth
between them, equivalent to almost two and a half times the US’s
annual GDP.
The reasons for the US’s dominance are well understood, Barclays
notes. It has an environment highly supportive of entrepreneurship,
deep and well-established capital markets, world-class
infrastructure and a huge domestic market. The retail investor
culture is also well established in the US.
The Barclays research shows that, out of the net financial wealth
of households, around 45 per cent is held in equities – a far
higher figure than for the other nine countries in the top 10.
Since 2002, the US stock market has recovered well from the bear
market that followed the dotcom bust.
The Standard & Poor’s composite of 500 leading stocks, the
S&P 500, has risen by 67 per cent during this period, although
if the figures for 2007 are compared with those for the period two
years earlier, in 2000, there has been only an 11 per cent
increase.
Holdings in real estate in the US make up 46.4 per cent of overall
net wealth, which is slightly below average for the developed
countries covered by this study. Since 2000, according to the
Economist House Price Index, there has been a 75 per cent increase
in property prices in the US, although there was a drop between
2006 and 2007, and further slides are expected as the fallout from
the subprime crisis continues to settle.
As the housing downturn and the credit crunch take their toll on
households and companies in the US, many commentators expect the
economy to slip into recession. The Economist Intelligence Unit
expects US growth to fall to 0.8 per cent in 2008, and believes
that the economy will experience a recession during the year. It
expects growth to recover only slowly, to 1.4 per cent, in 2009,
owing to the lingering effects of the housing downturn and
continued balance-sheet adjustment by banks.
