Who wants to be a Millionaire?
Despite the ongoing credit crisis and sluggish economic growth in many countries, the 12th annual World Wealth Report released recently by Merrill Lynch and Gapgemini revealed that the number of millionaires (otherwise referred to as the world’s high net worth individuals – HNWIs) world-wide has increased by six percent to 10.1 million with a combined wealth of $40.7 trillion during 2007.
This increase is largely attributable to the high returns from emerging markets, with a significant percentage of new millionaires coming from Latin America, Eastern Europe and the Middle East. The growth rates of these emerging economies have been boosted by gains in commodity exports and increased local demand, together with the fact that international markets are starting to recognize these emerging financial centers as influential global players. United States, Asian and European stock market indexes may have experienced a moderate growth, but many of the emerging markets show extended periods of impressive gains.
The report further revealed that Brazil, Russia, India and China (otherwise referred to as the BRIC nations) have continued to consistently play key roles in the creation of wealth. The majority of established European and Asian stock market indexes, however, showed single digit percentage growth with the German DAX being the only major traditional stock market index to maintain a double digit growth, thereby rising above its 2006 performance. This is in stark contrast to the performance of the Shanghai and Shenzhen stock exchanges, which showed a growth of 303 percent and 244 percent respectively. India’s Bombay Exchange and National Stock Exchange also showed excellent results with a growth of 122 percent and 115 percent respectively.
Interestingly, an overall enhanced awareness of social responsibility with regard to the environment has resulted in “green” investing becoming more popular on a global scale. Green investing offers investors lucrative returns along with the opportunity to play an active role in protecting the environment. The total investment in green technology increased to $117 billion in 2007 representing a 41 percent increase from 2005, with the most notable market segments being alternative energy sources such as wind turbines and solar energy.
In the midst of general pessimism with regard to the global economy, Merrill Lynch and Capgemini are of the opinion that near-term high levels of growth are indicated for emerging markets. Moreover, established economies, which were adversely affect by the US subprime crisis, are showing encouraging signs of stabilizing. The report emphasized that the global economy has two clear obstacles to deal with to enable it to move forward. Firstly, to identify and deal with factors that are inhibiting growth in mature markets, and secondly, to deal with the high risk of inflation in emerging markets.
Taking into account the positive 2007 performances, as well as recent and ongoing developments in world markets, the report suggests that there are strong indications that global HNWI wealth will continue to grow with more millionaires earning more money than ever before.