The wealth of high-net worth individuals (HNWIs) in the Middle East and Africa (MEA) region is likely to grow at 6 per cent annually over the next five years, according to a report.
The wealth of HNWIs grew to $70 trillion globally in 2018, albeit at a decelerated rate of 4% on the back of challenging equity markets, said the new Oliver Wyman and Deutsche Bank Report.
The strongest growth rates were observed in Emerging Markets at 7-8%, while Developed Markets trailed behind at 2-3%.
"We anticipate this growth divergence to continue over the coming years. Wealth managers looking to achieve above average growth rates must take a look at their Emerging Markets footprint and strategy to best position themselves to capture this growth," the report said.
"We expect HNW wealth to grow at a rate of 5% p.a. over the next five years – significantly lower than growth rates in more positive market environments – reaching $91 trillon in 2023. Emerging Markets will contribute 55% of growth with above average growth rates of 6-9%," it said.
Emerging Markets HNW wealth will grow at a much higher rate than in Developed Markets (8% vs. 4% p.a.), it said. Asia Pacific (APAC), Latin America, Middle East & Africa and Eastern Europe are expected to account for over half of global wealth growth until 2023, compared to one third of stock today. These are the markets where wealth managers will have the greatest opportunities to expand their customer base and can significantly grow asset under management (AuM) over the coming years. APAC and Latin America show the highest expected growth rates, the report said.
European markets experienced continued strain from political uncertainty, including Brexit, Italian elections, protests in France, and the approaching end of the Merkel era in Germany. Monetary tightening raised concerns of an economic slowdown. The Euro remained weak compared to other currencies, exacerbating negative market effects.
Economic growth rates in APAC and, especially, in China (2018 GDP growth: 6.6%) are slowing to more sustainable levels, although still markedly higher than Europe (EU: 1.8%) and North America (US: 2.9%). Deleveraging took priority over economic stimulus in China, which also suffered from US trade tariff tensions.
After two years of steady growth in asset prices, 2018 proved more challenging, particularly in the last 3 months of the year, with global equity markets down 9% (MSCI World Index). Markets have since rebounded in Q1 2019, buying wealth managers another period of relief before a major correction eventually hits.
Hong Kong and Singapore, the two leading offshore hubs in APAC, are expected to continue to grow strongly but shifting dynamics within the region have the potential to affect their relative importance in the future.
"We anticipate HNW wealth to continue growing through a likely near-term economic downturn supported by new wealth creation. At the same time, asset returns across the HNW population tend to be less sensitive to market stress scenarios, due to greater diversification and flexibility, and better access to investment advice and services. As a result, HNW wealth has historically rebounded quickly from previous downturns," the report said. - TradeArabia News Service
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