x

Abu Dhabi, UAEFriday 22 June 2018

Middle East millionaires' wealth growing slower than elsewhere in the world

Brazil, Russia and Canada produced fastest wealth growth in 2016

In terms of asset classes, equities were the biggest contributor to wealth formation last year. Richard Drew / AP
In terms of asset classes, equities were the biggest contributor to wealth formation last year. Richard Drew / AP

High net worth individuals (HNWIs) in the Middle East keep getting richer, but not as fast as their wealthy peers elsewhere in the world, with economic recoveries in Brazil, Russia and Canada prompting the largest rises in wealth, according to a new report from Cap Gemini.

The number of Middle Eastern HNWIs - defined as persons with wealth equal to or exceeding - $1 million - rose 4.8 per cent to 600,000 in 2016, with their combined wealth rising 5 per cent to US$2.42 trillion, according to the consultancy's World Wealth Report for 2017. The growth figures for the region are slower than for any of the five other regions tracked.

Globally, the number of HNWIs rose 7.5 per cent to 16.5 million and their wealth expanded by 8.2 per cent to $63.5tn.

The world’s richest are on track to expand their wealth by 5.9 per cent annually to reach $106tn by 2025, Cap Gemini forecast.

_____________________

Read more:

Global sovereign wealth funds may invest $185 billion in real estate by 2020, Knight Frank says

Size of GCC asset management market to double by 2020

______________________

While the report didn’t give a reason for the Middle East’s comparatively sluggish performance, the region has suffered from an oil-price slump that started in mid-2014 and has led to economic slowdown in the energy-rich Arabian Gulf region, which sits on the world’s biggest oil and gas reserves.

The biggest gainers in wealth last year were concentrated in Brazil, Russia and Canada, as an economic resurgence in each country helped reverse a downward trend in wealth accumulation.

The number of Russia’s richest expanded at the fastest global pace of 19.7 per cent in 2016, following a 1.8 per cent drop in 2015, thanks to a recovery in the country's equity markets. It was a similar case in Brazil, where rebounding equity and real estate markets pushed the number of HNWIs to grow 10.7 per cent, reversing a 7.8 per cent plunge in 2015.

Although the Asia-Pacific region retained its position as the region with the largest HNWI population, it suffered from a modest slowdown in growth in its number of rich individuals, which grew by 7.4 per cent for the year, while their wealth increased 8.2 per cent. Lower stock market valuations in China contributed to the slower pace of growth.

Despite this downtrend, Asia-Pacific is forecast to continue to dominate the HNWIs space in the coming eight years, followed closely by growth in North America, which will expand but at a slower pace than those achieved in 2005 through 2016.

The world's top four wealth markets - the US, Japan, Germany and China - are losing their edge in terms of numbers of newly minted HNWIs.

Only 59 per cent of new HNWIs emerged from the top four markets last year, compared with 81 per cent in 2015.

Ultra-HNWIs, with wealth equal to or exceeding $30m, grew in number thanks to growth of the richest population in Latin America, which has the highest concentration of ultra-HNWIs than any other region.

The global population of ultra-HNWIs expanded 8.3 per cent, nearly double the rate of 4.2 per cent recorded in 2015.

In terms of asset classes, equities were the biggest contributor to wealth formation worldwide.

Equities investments grew 6.3 per cent, representing one third of all HNWIs assets, a five-year high.

HNWIs are favouring equities investments and cash and equivalents over alternative investments which dropped 6 percentage points to 9.7 per cent of allocations, the lowest of all asset classes.