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Credit Suisse: Global wealth is expected to increase 61% by 2015; middle segment of wealth pyramid holds one-sixth of global wealth, to become emerging consumers and drive economic growth
Key findings of the Credit Suisse Global Wealth Report
“By releasing our inaugural Global Wealth Report we aim to offer the world’s most comprehensive study of wealth. As a premier bank with international wealth management as one of our core businesses, we want to understand the entire wealth spectrum from top to bottom across countries and regions. The Report provides a unique source of data and primary research on global wealth that will help investors to make important portfolio decisions,” said Walter Berchtold, Chief Executive Officer Private Banking, Credit Suisse. The Global Wealth Report (the Report), which is based on data as of mid-2010 across more than 200 countries, was produced by the Credit Suisse Research Institute in collaboration with Professors Anthony Shorrocks and Jim Davies, two of the world’s foremost experts on the topic of global household wealth.
Osama Abbasi, Chief Executive Officer Asia Pacific, Credit Suisse said: “The Report confirms that Asia Pacific countries, which now make up the bulk of the world’s middle class of emerging consumers, are driving the growth of the world’s wealth. China is the third-largest wealth market in the world. Economic expansion in other key markets in Asia Pacific means that today growth in average household wealth per adult is up to 10 times the global growth rate.”
Stefano Natella, Global Head of Equity Research for Investment Banking and a member of the Credit Suisse Research Institute Operating Committee, said: “The total global wealth currently held by 4.4 billion adults (defined as aged over 20) has increased 72% since 2000 to reach USD 195 trillion. We estimate that global wealth will grow 61% to USD 315 trillion by 2015. A further important finding is the emergence of the middle segment of the wealth pyramid, which is composed of one billion individuals located in the fastest-growing economies of the world. They have average wealth per adult of USD 10,000 to USD 100,000. This middle class of wealth holders owns one-sixth or USD 32 trillion of global wealth. And in total, almost 60% or 587 million individuals in the middle segment are located in Asia Pacific.”
Giles Keating, Credit Suisse’s global Head of Research for Private Banking and Asset Management and a member of the Credit Suisse Research Institute Operating Committee, said: “We believe that wealth provides people in the middle segment of the wealth pyramid with the financial security they need to become the world’s emerging consumers. The middle segment is therefore expected to replace indebted US households as the global growth locomotive. This underpins Credit Suisse’s research on the topic of Megatrends, notably on Demographics and the Multipolar World, which focus on companies that benefit from the Emerging Consumers investment theme. The Report also provides valuable data for important top-down investment analysis and puts current market concerns about government indebtedness into context by showing that the estimated USD 45 trillion in global government debt in mid-2010 represents less than a quarter of the USD 195 trillion in global household wealth.”
At the top of the wealth pyramid , there are over 1,000 billionaires globally, of which 245 are in Asia Pacific, 230 are in Europe and 500 are in North America. Moving down the wealth pyramid, there are 80,000 ultra-high-net-worth individuals (average wealth per adult above USD 50 million). Of the 24 million other high-net-worth individuals (average wealth per adult of USD 1 million to USD 50 million), just over 800,000 are in China, around 170,000 are in India and over four million are in the rest of Asia Pacific. Below this, more than 330 million individuals have average wealth per adult of USD 100,000 to USD 1 million.
Switzerland and Norway have emerged as the richest nations in the world in terms of average wealth per adult, which stands at USD 372,692 and USD, 326,530 respectively. They are followed by Australia, which is in third place with average wealth per adult of USD 320,909 and Singapore with average wealth per adult of USD 255,488. Figures for Australia and Singapore have both doubled in the last decade.
At the base of the wealth pyramid there are three billion people with average wealth per adult of below USD 10,000, of which 1.1 billion own less than USD 1,000 and 307 million are in India. Some 2.5 billion people are as yet unbanked. As the wealth of this significant group grows, it will both require and fuel the creation of new financial services. Two emerging trends are new e-payment systems and microfinance (to date, 154 million people globally use microfinance) which have thrived in countries where banking systems have been either underdeveloped or more oriented towards the rich. These innovations have enabled the creation of new wealth in countries such as Mexico, Indonesia and Bangladesh.
In the Middle East , The Credit Suisse Research Institute estimates that average wealth per adult in Qatar stands at USD 109,369, which is higher than that of Korea, Greece, Portugal and Spain, and is only just below the European average. Similarly, wealth per adult for the United Arab Emirates has reached USD 150,000, which is higher than that of the Netherlands.
China stands out as the third-largest wealth generator in the world, with total household wealth of USD 16.5 trillion, behind only the US (USD 54.6 trillion) and Japan (USD 21.0 trillion). If historic growth trends continue, total household wealth in China could rise 111% to USD 35 trillion by 2015, outstripping Japan to become the second highest in the world.
Wealth has also surged in other emerging markets in Asia Pacific, especially India and Indonesia . The total wealth of India has tripled in a decade to USD 3.5 trillion while Indonesia’s has grown five-fold to USD 1.8 trillion. By 2015, based on current trends, India’s wealth could nearly double to USD 6.4 trillion while Indonesia’s could grow as impressively, taking it to over USD 3.0 trillion.
Major developed economies top the global household debt league table
The Report finds that major developed economies top the global household debt league table, compared with the relatively low household debt levels in the emerging countries. There is a clear correlation between household debt and wealth per adult: a high level of wealth per adult in a country facilitates greater access to credit, which can have both positive and negative effects. On the one hand it encourages economic development, but on the other hand it can encourage people to become over-leveraged. The US heads the global household debt league table, with total debt of USD 14 trillion, followed by Japan with USD 4 trillion and Germany with USD 2 trillion. Household debt in developed countries has significantly outsized that of the emerging economies. South Korea has the largest household debt in the emerging markets of Asia at USD 830 billion, representing 6% of the total household debt of the US. Denmark ranks first in terms of average debt per adult (USD 113,978) and Switzerland second (USD 100,651).
The total global wealth of USD 195 trillion comprises USD 115 trillion in non-financial assets (mainly real estate) and USD 117 trillion in financial assets, offset by USD 37 trillion of household debt. Global financial assets have increased 56% in the past decade, from USD 75 trillion to USD 117 trillion, while non-financial assets have doubled during the same period from USD 57 trillion to USD 115 trillion. Household debt has also roughly doubled to USD 37 trillion over the same period. Non-financial assets have grown faster than financial assets for two reasons: first, wealth in the fast-growing emerging markets is predominantly made up of non-financial assets or real estate (nearly 90% in India and Indonesia); second, the global financial crisis in 2008-2009 mainly took its toll on household holdings of financial assets.
The credit crisis has taken its toll on countries where non-financial wealth had risen rapidly
The value of non-financial assets (i.e. property) in Ireland fell from a level of USD 166,000 in 2007 to USD 103,000 as of mid-2010. Similarly, in the same period, the value of non-financial assets fell from USD 118,500 to USD 89,444 in Spain and from USD 23,000 to USD 15,685 in Estonia.
Notes to Editors
- The Report defines wealth as the value of financial assets and non-financial assets (mainly real estate), minus household debt.
- All current data relate to mid-2010 and are at then-current market exchange rates (not purchasing power parity).
- The figures presented in the Report are based on the best available data on household assets and debts, updated and estimated where necessary. Full information on sources and methodology is provided in the 120-page Credit Suisse Wealth Databook.
- Projections to 2015 are made by the Credit Suisse Research Institute and are based on regressions of the correlation between Gross Domestic Product (GDP) growth, wealth and starting levels of wealth per adult, combined with the International Monetary Fund’s forecasts for GDP.