Riches from the Rich: Reaching Asia's Wealthy Consumers

by Angie Mak, 23 October 2009

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topics:
Asset Management Finance and Banking

tags:
assets Capgemini financial services forecasts high net worth individuals investing luxury goods Merrill Lynch saving

“Let me tell you about the very rich,” F. Scott Fitzgerald once wrote. “They are different from you and me.” Knowing exactly how different the rich are has made fortunes for many companies, including those selling to Asia’s growing legions of affluent consumers. But then came the global recession. Have the region’s high net worth individuals (HNWIs) become even more different?

Apparently so. Merrill Lynch and Capgemini’s fourth annual wealth report, released recently, reveals major changes in the investment habits and consumption of luxury goods by Asia Pacific’s millionaires in 2008. Their ranks have diminished, to start with. The region’s population of HNWIs fell 14.2% to 2.4 million people, and their wealth decreased 22.3% to US$7.4 trillion. Many of them, particularly in Hong Kong, no longer had at least US$1 million in investable assets, the minimum requirement to qualify as an HNWI.

This was not supposed to happen. In the beginning of 2007, the Asia Pacific region was relatively unaffected by the slowdown in North America’s economy, backed by robust GDP growth and resilient stock market performances. Prior to August 2008, it was assumed that the recession would not impact the luxury sector, which in its entirety had seen double-digit growth this past decade.

The good news is that HNWI investing and spending are now noticeably on the rise as stock markets and economies, particularly those in China and India, show signs of recovery and growth. Despite the setback in 2008, the wealth report says the concentration of wealth and size of Asia’s upper-class segment will outpace that in the rest of the world. By 2013, it forecasts, Asia will surpass North America in terms of growth in wealth and, eventually, in the number of HNWIs who live and work there.

Where the Rich Are

The question for the purveyors of financial services and luxury goods and other companies catering to Asia’s wealthy is how to best position their firm in the face of these forecasts and trends. Which economies will have the most number of wealthy people? How big is the addressable market? What are the investing and spending behaviour of Asian HNWIs? Has the recession changed patterns of consumption?

Figure 1. Breakdown of Asia Pacific HNWI Financial Assets, 2006-2010F (Enlarge image)

_{Source: Merrill Lynch, Capgemini. (“Asia-Pacific Wealth Report 2009”)}

From 2003 to 2008, HNWI wealth had soared in the Asia Pacific. In 2007, five of the world’s fastest-growing HNWI populations were found the region’s markets, with India and China in the lead. That same year, the number of HNWIs in the Asia Pacific had grown by 8.7% to 2.8 million people, who between them boasted combined wealth of US$9.5 trillion (an increase of 12.5% from 2006).

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