Asia-Pacific region is crucial to global economic recovery

PUBLISHED : Monday, 28 November, 2011, 12:00am
UPDATED : Monday, 28 November, 2011, 12:00am


Global wealth creation is becoming tougher in the present economic climate, but Asia-Pacific continues to rise in the wealth creation ladder.

A report by Swiss investment bank Credit Suisse finds that Asia-Pacific has emerged as the key contributor of global wealth growth, accounting for 36 per cent of all global wealth creation since 2000, and 54 per cent since January last year.

The Credit Suisse Research Institute's second annual Global Wealth Report showed that total global wealth has increased 14 per cent from US$203 trillion in January 2010 to US$231 trillion in June this year. The report says that emerging markets remain the main wealth growth engine, with the fastest growth seen in Latin America, Africa and Asia.

Fan Cheuk-wan, head of research Asia-Pacific, at Credit Suisse, says that in the next five years, global wealth is expected to rise by 50 per cent to US$345 trillion and wealth per adult to increase 40 per cent to reach US$70,700, led by growth in emerging markets. Fan says that emerging markets have considerable scope to increase personal wealth given their much lower ratio of net financial assets to income and a much lower debt-income ratio than found in mature economies.

Ageing is also expected to increase the demand for financial assets relative to real assets such as housing.

'Our second edition of the Global Wealth Report reconfirms that these are times of unprecedented economic change, and a radical reconfiguration of the world's economic order is taking shape. Emerging markets are important drivers of the global recovery and remain the key growth engines of global wealth,' says Osama Abbasi, CEO, Asia-Pacific, at Credit Suisse.

Giles Keating, global head of research for private banking and asset management, Credit Suisse and a member of the Credit Suisse research institute operating committee, says: 'Credit Suisse believes this fast-emerging wealth will drive new trends in consumption and investment in Asia. The much higher debt per adult level in Europe versus Asia, together with the much higher wealth growth rate, suggests there may be scope for significant mutual collaboration to help mitigate the euro debt crisis.'

Stefano Natella, global head of equity research for investment banking and a member of the Credit Suisse Research Institute Operating Committee, says: 'Unlike other studies, the Credit Suisse Global Wealth Report generates unique proprietary data and aims to offer the most comprehensive study of world wealth. It analyses the wealth distribution of all the 4.5 billion adults in the world in more than 200 countries, using a rigorous and independent research approach.'

The Credit Suisse report also revealed that total global wealth rose 14 per cent from US$203 trillion in January last year to US$ 231 trillion in June 2011 on the back of continued economic recovery from the global financial crisis.

Wealth per adult increased 9 per cent from US$46,600 last January to US$51,000 in June this year, with the fastest growth registered in Latin America, Africa and Asia. The United States stood out as the largest wealth generator in the world over the 18 months, adding US$4.6 trillion to global wealth.

Asia-Pacific was the main contributor to the rise in global wealth during the period, with China, Japan, Australia and India among the top six contributors. Asia-Pacific stands out as the key contributor of global wealth growth, accounting for 36 per cent of global wealth creation since 2000 and 54 per cent since last year.

'A notable finding of the global wealth report is that wealth creation in US is slowed by heavy indebtedness. This is not the case in Asia, where savings is very high,' Fan says.

Total household wealth in Asia-Pacific rose 23 per cent from US$61 trillion last January to US$ 75 trillion in June this year. This sharply contrasted with the 9.2 per cent and 4.8 per cent total wealth growth in North America and Europe over the same period respectively.

The report finds that Europeans are sitting on much higher average debt per adult at US$25,550, versus US$9,227 in Asia-Pacific.

The sharp divergence in indebtedness in Europe and Asia provides significant scope for Asia and Europe to work together to relieve the euro-zone debt crisis.