Wealthy board Net gravy train

PUBLISHED : Wednesday, 03 May, 2000, 12:00am
UPDATED : Wednesday, 03 May, 2000, 12:00am

Asia's wealthy swelled their ranks last year, with the number of high net worth individuals in the region outstripping the global average, according to Merrill Lynch.

Many of Asia's nouveau riche have risen to their lofty financial heights on the Internet revolution of the past 12 months, having already bloated the wallets of Americans and Europeans, a Merrill Lynch report said.

The investment bank, in co-operation with Gemini Consulting, found that the number of super-rich in Asia grew from 1.3 million to 1.7 million and they saw their bank balances improve by an average 23 per cent last year, against a global rise of 12 per cent to US$25.5 trillion.

Much of the rise was attributed to improving global economic conditions - particularly across Asia, where countries and companies emerged from 18 months of recession.

Linked to this was the performance of share markets in the region, where growth averaged 70 per cent compared with the 37 per cent global rise. In comparison, the US market rose only 29.5 per cent last year.

In its world Wealth Report, Merrill Lynch said if this rate of growth were sustained, the number of Asian high net worth individuals could begin to rival those in Europe and the US.

Globally, Merrill Lynch noted the increasing emergence of younger, active high net worth individuals, who created their wealth through technology-oriented enterprises. Public listings of Internet companies and the increasing frequency of related corporate option packages was significantly intensifying wealth creation.

Of the estimated eight million people holding liquid financial assets of more than US$1 million, about 2.5 million, or 30 per cent, were from the United States, while 2.2 million Europeans account for a further 26 per cent.

The report forecast 12 per cent growth per annum in wealthy individual assets for the next five years, reaching US$44.9 trillion by 2004.

This was not simply because of continued global prosperity and expansion of existing financial assets, but also because such individuals were likely to invest a bigger proportion of their assets in higher risk, higher yielding financial instruments, either equities or venture-capital projects, the report found.

Head of Merrill Lynch's international private client group in Hong Kong, Francis Chan, said the rising number of wealthy individuals presented a new challenge for banks to service their needs properly.

'Success would ride on critical factors such as innovation, speed, technology platform, identification of specialist functions in addition to investment - taxation, law and real estate, and increased personalisation of service,' Mr Chan said.

The report also identified 55,000 'ultra' high net worth individuals worldwide - those individuals who have financial assets of more than US$30 million, a rise of 18 per cent.

'The relentless rise in [high net worth individuals] numbers and assets worldwide continued in 1999, boosted by a favourable economic environment and exceptional stock market performance,' global president of Merrill's private client group, Winthrop Smith, said.

The report found that the ultra-rich take a shorter-term view of investment strategies and are less risk-averse.

They also accept only top performance and are more demanding than even normal high net worth individuals.