Who's getting richer
The world’s exclusive club of millionaires continues to grow in number – but only because there are more of them in the fast-growing regions of the Middle East, Eastern Europe and Latin America.
The 12th annual World Wealth Report, released by Merrill Lynch and Capgemini. reveals the world's richest individuals (defined as having net assets of more than $US1 million excluding their homes) increased their fortunes 9.4 percent to a total of more than $US40 trillion for the first time.
Their number also increased – up 6 percent in 2007 to just over 10 million – and their average assets exceeded $US4 million, also for the first time. The number of super-rich, defined as people with net assets of $US30 million, increased 8.8 percent to 103,320.
The US has the largest number of millionaires, some three million, followed by Germany with 826,000 and the UK with nearly 500,000. China is not far behind the UK with 415,000. Ireland was one of the few countries with a decline (down 4 percent to 20,000). Australia has 172,000, up from 161,000 in 2006.
Wealth is driven by growth in both real GDP and market capitalisation, and these occurred in spades in the so-called Bric economies – Brazil, Russia, India and China (not to mention their economic satellites) – even as the rich nations of the West were squeezed by the credit crunch.
Impressive growth of emerging economies was boosted largely by thriving export sectors and heightened domestic demand. The largest regional growth areas were the Middle East (up 15.6 percent), Eastern Europe (14.3 percent) and Latin America (12.2 percent).
“Gains in commodity exports, paired with growing international acceptance of emerging financial centres as significant global players, contributed to the growth rates of emerging economies,” the report says.
India charges ahead
India led rich list growth at 22.7 percent, driven by a sharemarket value increase of 118 percent and real GDP growth of 7.9 percent. Although India's real GDP growth decelerated from 9.4 percent in 2006, current levels are considered more stable and sustainable. India's two largest exchanges — the Bombay Stock Exchange and the National Stock Exchange — ranked among the world's top 12 exchanges by the end of 2007, boosted by initial public offering markets and heightened international interest.
China follows fast
China experienced the second-largest expansion of its rich-listers, advancing 20.3 percent — an increase fueled by market capitalisation growth of 291 percent and real GDP growth of 11.4 percent. Significant price increases and strong IPO activity propelled the Shanghai Exchange to become the sixth-largest exchange in the world in terms of market capitalisation.
The report suggests that as sharemarket and real GDP growth in China were spread over a larger population, there were smaller per capita gains in China. In 2006, India had a larger market capitalisation growth than gross national income, significantly impacting on rich-list population growth in India. In addition, China is currently experiencing explosive growth in its "mass affluent" population, which has yet to break the threshold of $US1million in net assets.
The country with the third-highest rich-list growth rate (19.1 percent) was spurred by a wave of robust market capitalisation growth of 93 percent and real GDP growth of 5.1 percent. Net private capital flows to Latin America doubled in 2007, contributing to the Bovespa Stock Exchange's fourth-place ranking among the world's largest IPO markets and 7.2 market share gain. This, according to the report, lent support to the establishment and global integration of the Brazilian financial system.
Russia was home to one of the world's 10 fastest-growing rich-list populations, despite growth deceleration from 15.5 percent in 2006 to 14.4 percent in 2007. Solid gains of 37.6 percent in market capitalisation and 7.4 percent in real GDP represented the growing international interest in the country as a global player, suggesting that the development of Russia's external relationships will likely improve the economy's fundamentals.
Mature markets tread water
The slowdown in the US also weighed down on equity returns and economic growth in the mature European and Asian economies. This was reflected in a cooling housing market, a credit squeeze and greater sharemarket volatility.
The world's worst performer, Japan's Nikkei 225, contracted 11.1 percent, while Europe's best performer, the German DAX, was the only major traditional index to outpace its 2006 performance and sustain double-digit growth.
"The divide between market capitalisation growth in mature and emerging economies was significantly more pronounced in 2007 than in previous years," said Bertrand Lavayssière, managing director, Capgemini Global Financial Services. "Despite slowdowns in the growth of traditional stock exchanges and significant market volatility, several emerging market exchanges experienced robust gains in 2007, further accelerating global wealth."