Source : The Business Times, October 19, 2007
They allocate 36% of funds to property, next to Korea, say Merrill, Capgemini
THE average high net worth individual (HNWI) in Singapore has US$4.9 million of investible assets, slightly more than the regional and global average, the Merrill Lynch-Capgemini Asia Pacific Wealth Report has found.
Globally, HNWIs have investible assets of about US$3.9 million, while the regional average at end-2006 was US$3.3 million.
Singapore's wealthy allocated most of their investible funds - 36 per cent - to real estate. This was second only to South Korea, where the wealthy invested 42 per cent in property.
Other allocations by Singaporeans were 18 per cent cash and 26 per cent equities.
On real estate, Merrill Lynch Asia-Pacific investment strategist Stephen Corry told reporters yesterday the region's property cycle is 'closer to the bottom than to the top'.
A recent report by the firm found the boom is still in its early stages and said prices do not appear excessive relative to income. Asian property prices have also lagged global prices.
But Mr Corry said there are two exceptions: 'High-end Hong Kong and Singapore properties are looking expensive. I actually see good value in the mass residential side. The price gap between high-end and lower-end property has reached unprecedented levels.'
The Merrill Lynch-Capgemini Asia-Pacific wealth report aims to give a detailed profile of the region's HNWIs and their investment preferences.
The report found that Singapore has about 928 ultra HNWIs, comprising 1.39 per cent of the population.
These are people whose investible assets exceed US$30 million, as opposed to 'ordinary' HNWIs whose qualifying threshold is US$1 million.
The number of ultra HNWIs in the region grew 12.2 per cent to 17,500 at end-2006, said Gregory Smith, Capgemini Australia's vice-president for wealth management.
'We are seeing a sharp rise in the number of ultra HNWIs,' he said. 'This is particularly evident in China, where that country's phenomenal economic growth is reflected in a high concentration of ultra HNWIs.'
The study found that more than 28 per cent of the region's ultra HNWIs are in China.
In terms of the sources of Singaporeans' wealth, 36 per cent was derived from businesses and 22 per cent inherited. In total, wealthy Singaporeans' assets are estimated at US$320 billion, giving them a 4 per cent share of the Asia-Pacific's total wealth pie.
About 43 per cent of HNWIs in Singapore are aged 41 to 55 and 39 per cent aged 56 to 70. Merrill Lynch market managing director (South Asia) Kong Eng Huat said: '(Singapore) individuals tend to be more active investors and are continuing to build their wealth. They are also actively planning or in the process of transferring wealth to their beneficiaries and children.'
'Those with inherited wealth tend to have a more complex portfolio structure and restrictions. They tend to focus on capital preservation.'
The Merrill Lynch-Capgemini report expects the wealthy in the region to diversify into fixed-income and alternative investments and to increase their international exposure. At the moment, 51 per cent of their assets are invested in the Asia-Pacific.
Friday, October 19, 2007
S'pore Has 67,000 Millionaires
Source : The Straits Times, Oct 18, 2007
They are mostly businessmen in the 41 to 55 age group, with their wealth mainly in real estate.
THE typical millionaire in Singapore - and there are 67,000 of them - is a businessman aged between 41 and 55 with the bulk of his wealth in real estate.
The number of millionaires here rose by 21.1 per cent in 2006, making Singapore the fastest-growing population of the rich in the region, according to the second annual Asia-Pacific wealth report released by Merrill Lynch and research firm Capgemini on Thursday.
To join the super-rich club, these individuals must have US$1 million in assets, not including their homes. Other investments in real estate are included.
'Robust economic growth and strong financial markets, along with astute government fiscal policies has continued to contribute to Singapore's growth rate,' said Rahul Malhotra, Merrill Lynch's head of global wealth management for Asia Pacific.
'Real estate and equities investments have also continued to be the twin drivers behind this growth.'
The report found that rich Indonesians living in Singapore comprised a significant share of the local millionaire population and wealth.
There are also 928 ultra-rich people here, with net wealth of at least US$30 million each.
Singapore's millionaires held a combined US$323.7 billion in financial assets at the end of last year, up 24.5 per cent from 2005.
Of this, some 36 per cent was in real estate, with 26 per cent in equities, 18 per cent in cash and deposits, 10 per cent in fixed income investments and 10 per cent in alternative investments.
And 46 per cent of the millionaires are between 41 and 55 years, with 32 per cent between 56 and 70, and 15 per cent between 31and 40.
Over a-third of these millionaires derived their wealth from business, with the next two sources of wealth being inheritance (22 per cent) and income (18 per cent).
The report also found out that 78 per cent of them are men.
Regionally, the number of millionaires grew 8.6 per cent in 2006 to 2.6 million, making up 27 per cent of the world's millionaires.
India and Indonesia followed Singapore as the next two fastest-growing millionaire populations, with 20.5 per cent and 16 per cent increases in the numbers of millionaires respectively.
The combined wealth of the region's millionaires swelled 10.5 per cent to US$8.4 trillion, up by from 2005, with Japan accounting for 43 per cent and China about a fifth.
The report also said the region's class of super-rich individuals whose assets exceed US$30 million grew by 12.2 per cent to 17,500, exceeding the global rate of 11.3 per cent.
'It is really a story of growth, growth and growth, all across,' said Mr Malhotra.
Wealth creation was driven by the region's rapidly developing economies, among the fastest-growing in the world - led by China and India.
Handsome returns from regional stock markets also boosted wealth, as benchmark stock indices in China, Indonesia, India and Hong Kong outperformed most mature capital markets with returns over 30 per cent, the report said.
Savings rates, as a percentage of GDP, were higher in Asia-Pacific than most developed markets, with rates greater than 40 per cent in China, Singapore and Hong Kong.
They are mostly businessmen in the 41 to 55 age group, with their wealth mainly in real estate.
THE typical millionaire in Singapore - and there are 67,000 of them - is a businessman aged between 41 and 55 with the bulk of his wealth in real estate.The number of millionaires here rose by 21.1 per cent in 2006, making Singapore the fastest-growing population of the rich in the region, according to the second annual Asia-Pacific wealth report released by Merrill Lynch and research firm Capgemini on Thursday.
To join the super-rich club, these individuals must have US$1 million in assets, not including their homes. Other investments in real estate are included.
'Robust economic growth and strong financial markets, along with astute government fiscal policies has continued to contribute to Singapore's growth rate,' said Rahul Malhotra, Merrill Lynch's head of global wealth management for Asia Pacific.
'Real estate and equities investments have also continued to be the twin drivers behind this growth.'
The report found that rich Indonesians living in Singapore comprised a significant share of the local millionaire population and wealth.
There are also 928 ultra-rich people here, with net wealth of at least US$30 million each.
Singapore's millionaires held a combined US$323.7 billion in financial assets at the end of last year, up 24.5 per cent from 2005.
Of this, some 36 per cent was in real estate, with 26 per cent in equities, 18 per cent in cash and deposits, 10 per cent in fixed income investments and 10 per cent in alternative investments.
And 46 per cent of the millionaires are between 41 and 55 years, with 32 per cent between 56 and 70, and 15 per cent between 31and 40.
Over a-third of these millionaires derived their wealth from business, with the next two sources of wealth being inheritance (22 per cent) and income (18 per cent).
The report also found out that 78 per cent of them are men.
Regionally, the number of millionaires grew 8.6 per cent in 2006 to 2.6 million, making up 27 per cent of the world's millionaires.
India and Indonesia followed Singapore as the next two fastest-growing millionaire populations, with 20.5 per cent and 16 per cent increases in the numbers of millionaires respectively.
The combined wealth of the region's millionaires swelled 10.5 per cent to US$8.4 trillion, up by from 2005, with Japan accounting for 43 per cent and China about a fifth.
The report also said the region's class of super-rich individuals whose assets exceed US$30 million grew by 12.2 per cent to 17,500, exceeding the global rate of 11.3 per cent.
'It is really a story of growth, growth and growth, all across,' said Mr Malhotra.
Wealth creation was driven by the region's rapidly developing economies, among the fastest-growing in the world - led by China and India.
Handsome returns from regional stock markets also boosted wealth, as benchmark stock indices in China, Indonesia, India and Hong Kong outperformed most mature capital markets with returns over 30 per cent, the report said.
Savings rates, as a percentage of GDP, were higher in Asia-Pacific than most developed markets, with rates greater than 40 per cent in China, Singapore and Hong Kong.
HK's Wild Run Raises Fears Of '87 Crash Again
Source : The Straits Times, Oct 19. 2007
20th anniversary of October plunge is timely reminder not to get carried away
EVEN 20 years on, memories of the 'Black Monday' Oct 19, 1987 stock market crash on Wall Street can still send shudders down the spines of older investors.
The scale of the plunge back then was so breathtaking, and traumatising, that mini crashes that rocked markets earlier this year simply pale by comparison.
And many looking back to that fateful day on the 20th anniversary today may feel a sense of foreboding.
The anniversary offers a timely warning to investors not to get carried away by the bull run that has resumed on regional bourses, now that they have shrugged off the August blues that followed the US mortgage crisis. It is also time to realise that the next big global crash may well be set off in Asia, not Wall Street.
Back on Oct 19, 1987, following what has been widely regarded as an era of greed and irrational exuberance, Wall Street plunged 23 per cent in a single day amid a spate of big corporate bankruptcies.
It was the biggest single-day plunge ever on the New York market. The only warning signs had been several relatively modest falls the previous week.
As the crash reverberated around the globe, Singapore's Straits Times Index (STI) plunged 25 per cent in a day.
Hong Kong shut its stock market for four days in the hope that global markets would have regained their footing by the time it reopened for trading.
Alas, this turned out to be a fool's dream. The Hang Seng Index dived 33.3 per cent when trading finally restarted - triggering a collapse of the then-Hong Kong Futures Exchange.
In the 20 years since, it has been more common to see a series of mini-crashes, such as those in August, when the STI fell by over 100 points on four occasions.
And with all the safeguards that have been put in place since 1987, many are confident that a crash equal in magnitude to that sell-off is no longer probable.
It is, for instance, unlikely that a stock market plunge would trigger a global depression like the one experienced after the 1929 crash. Central bankers have learnt to flood the market with funds to lift investor sentiment.
In 1987, then newly installed Federal Reserve chairman Alan Greenspan made his mark by restoring confidence, saying the Fed 'stands ready to provide all necessary liquidity' in the wake of the crash.
Last month, current Fed chief Ben Bernanke did the same thing, surprising investors with a 0.5-percentage point cut in interest rates, after stocks around the world plunged by more than 10 per cent in a matter of weeks.
But while Wall Street is still regarded as the key global market to watch, the centre of gravity in the global financial system is gradually shifting to Asia.
To give some examples: The Industrial & Commercial Bank of China has overtaken United States-based Citigroup to become the world's most valuable bank. And the world's second- largest listed firm by market value is another China group, PetroChina, just after another oil giant ExxonMobil.
Many fear that a serious knock to global markets on the scale of that seen in October 1987 could well come from China.
A 9 per cent rout in Shanghai on Feb 27 ignited tailspins across Europe. Then came a 416-point plunge on Wall Street - its worst drop since falling 684 points on its first day of trading after the Sept 11, 2001 attacks.
The rocket-like ascent of Hong Kong's Hang Seng Index over the past two months almost defies credulity.
Since Aug 17, the Hang Seng has climbed almost 50 per cent from its intra-day low - touching the 30,000 level yesterday for the first time. China stocks in Hong Kong have risen even more - by an eye-popping 80 per cent.
Sure, there has been a steady stream of initiatives by the mainland to allow its citizens to invest in Hong Kong shares.
This has attracted billions into Hong Kong, as every fund manager and his dog salivated to get a piece of the action first.
But the gains may simply be unsustainable, even if China grows at the projected levels.
So the spectre of October 1987 hangs over investors 20 years on - not in New York but here in Asia, where a fresh wave of irrational exuberance may be looming over Hong Kong and Shanghai.
20th anniversary of October plunge is timely reminder not to get carried away
EVEN 20 years on, memories of the 'Black Monday' Oct 19, 1987 stock market crash on Wall Street can still send shudders down the spines of older investors.
The scale of the plunge back then was so breathtaking, and traumatising, that mini crashes that rocked markets earlier this year simply pale by comparison.
And many looking back to that fateful day on the 20th anniversary today may feel a sense of foreboding.
The anniversary offers a timely warning to investors not to get carried away by the bull run that has resumed on regional bourses, now that they have shrugged off the August blues that followed the US mortgage crisis. It is also time to realise that the next big global crash may well be set off in Asia, not Wall Street.
Back on Oct 19, 1987, following what has been widely regarded as an era of greed and irrational exuberance, Wall Street plunged 23 per cent in a single day amid a spate of big corporate bankruptcies.
It was the biggest single-day plunge ever on the New York market. The only warning signs had been several relatively modest falls the previous week.
As the crash reverberated around the globe, Singapore's Straits Times Index (STI) plunged 25 per cent in a day.
Hong Kong shut its stock market for four days in the hope that global markets would have regained their footing by the time it reopened for trading.
Alas, this turned out to be a fool's dream. The Hang Seng Index dived 33.3 per cent when trading finally restarted - triggering a collapse of the then-Hong Kong Futures Exchange.
In the 20 years since, it has been more common to see a series of mini-crashes, such as those in August, when the STI fell by over 100 points on four occasions.
And with all the safeguards that have been put in place since 1987, many are confident that a crash equal in magnitude to that sell-off is no longer probable.
It is, for instance, unlikely that a stock market plunge would trigger a global depression like the one experienced after the 1929 crash. Central bankers have learnt to flood the market with funds to lift investor sentiment.
In 1987, then newly installed Federal Reserve chairman Alan Greenspan made his mark by restoring confidence, saying the Fed 'stands ready to provide all necessary liquidity' in the wake of the crash.
Last month, current Fed chief Ben Bernanke did the same thing, surprising investors with a 0.5-percentage point cut in interest rates, after stocks around the world plunged by more than 10 per cent in a matter of weeks.
But while Wall Street is still regarded as the key global market to watch, the centre of gravity in the global financial system is gradually shifting to Asia.
To give some examples: The Industrial & Commercial Bank of China has overtaken United States-based Citigroup to become the world's most valuable bank. And the world's second- largest listed firm by market value is another China group, PetroChina, just after another oil giant ExxonMobil.
Many fear that a serious knock to global markets on the scale of that seen in October 1987 could well come from China.
A 9 per cent rout in Shanghai on Feb 27 ignited tailspins across Europe. Then came a 416-point plunge on Wall Street - its worst drop since falling 684 points on its first day of trading after the Sept 11, 2001 attacks.
The rocket-like ascent of Hong Kong's Hang Seng Index over the past two months almost defies credulity.
Since Aug 17, the Hang Seng has climbed almost 50 per cent from its intra-day low - touching the 30,000 level yesterday for the first time. China stocks in Hong Kong have risen even more - by an eye-popping 80 per cent.
Sure, there has been a steady stream of initiatives by the mainland to allow its citizens to invest in Hong Kong shares.
This has attracted billions into Hong Kong, as every fund manager and his dog salivated to get a piece of the action first.
But the gains may simply be unsustainable, even if China grows at the projected levels.
So the spectre of October 1987 hangs over investors 20 years on - not in New York but here in Asia, where a fresh wave of irrational exuberance may be looming over Hong Kong and Shanghai.
Property Booms, Busts Make Economy Vulnerable
Soure : The Business Times, October 19, 2007
SINGAPORE ECONOMIC POLICY CONFERENCE
Bubble cuts private spending, raises reliance on volatile foreign demand
PROPERTY price booms and busts make Singapore's economic growth more vulnerable to volatile factors and should be prevented, an economist at a think-tank said here yesterday.
While the impact of a spike in property prices on overall GDP growth is 'quite subdued', a property price bubble causes private consumption expenditure to shrink, making the economy more dependent on foreign demand and business spending which are much more volatile, said Tilak Abeysinghe.
The deputy director of the Singapore Centre for Applied and Policy Economics (Scape) at the National University of Singapore, was speaking at the inaugural Singapore Economic Policy Conference organised by Scape at Four Seasons Hotel.
His team's research found that while higher property prices spur construction investment, an accompanying dip in private consumption means overall economic growth does not change much as a direct result of property price inflation.
But the overall effect is still undesirable as it makes the economy far more dependent on business spending and foreign demand for its exports, both of which are more volatile than domestic consumption, he said.
The consumption expenditure share of Singapore's GDP has fallen from more than two-thirds in 1997 to about 40 per cent today. 'If consumption expenditure in Singapore falls further, GDP growth will be very vulnerable to external demand and investment demand,' he said.
Research found that in contrast with economies such as the US, higher housing prices here do not seem to encourage more personal spending.
In Singapore, 'housing wealth is relatively illiquid,' he said. 'You just can't sell your house and move to a suburban house.' This means the 'wealth effect' of housing price inflation seen in countries such as the US - when people spend more as the value of their homes rise - is much less noticeable in Singapore.
Also, 'when housing prices go up, mortgage payments also increase, so people have less to spend on consumption,' he said.
He believes policymakers here should 'do their best' to prevent a property price bubble because of its effect on private consumption spending and its tendency to widen the income gap between the rich and poor.
'It should be possible' to prevent another bubble from building by identifying the main cause of the recent run-up in property prices - likely to be people buying properties for investment rather than owner-occupiers - and introducing measures to dampen demand from this source, he said.
But he also cautioned against flooding the market with a vast supply of new homes, which could trigger a price crash and set the conditions for a new bubble.
SINGAPORE ECONOMIC POLICY CONFERENCE
Bubble cuts private spending, raises reliance on volatile foreign demand
PROPERTY price booms and busts make Singapore's economic growth more vulnerable to volatile factors and should be prevented, an economist at a think-tank said here yesterday.
While the impact of a spike in property prices on overall GDP growth is 'quite subdued', a property price bubble causes private consumption expenditure to shrink, making the economy more dependent on foreign demand and business spending which are much more volatile, said Tilak Abeysinghe.
The deputy director of the Singapore Centre for Applied and Policy Economics (Scape) at the National University of Singapore, was speaking at the inaugural Singapore Economic Policy Conference organised by Scape at Four Seasons Hotel.
His team's research found that while higher property prices spur construction investment, an accompanying dip in private consumption means overall economic growth does not change much as a direct result of property price inflation.
But the overall effect is still undesirable as it makes the economy far more dependent on business spending and foreign demand for its exports, both of which are more volatile than domestic consumption, he said.
The consumption expenditure share of Singapore's GDP has fallen from more than two-thirds in 1997 to about 40 per cent today. 'If consumption expenditure in Singapore falls further, GDP growth will be very vulnerable to external demand and investment demand,' he said.
Research found that in contrast with economies such as the US, higher housing prices here do not seem to encourage more personal spending.
In Singapore, 'housing wealth is relatively illiquid,' he said. 'You just can't sell your house and move to a suburban house.' This means the 'wealth effect' of housing price inflation seen in countries such as the US - when people spend more as the value of their homes rise - is much less noticeable in Singapore.
Also, 'when housing prices go up, mortgage payments also increase, so people have less to spend on consumption,' he said.
He believes policymakers here should 'do their best' to prevent a property price bubble because of its effect on private consumption spending and its tendency to widen the income gap between the rich and poor.
'It should be possible' to prevent another bubble from building by identifying the main cause of the recent run-up in property prices - likely to be people buying properties for investment rather than owner-occupiers - and introducing measures to dampen demand from this source, he said.
But he also cautioned against flooding the market with a vast supply of new homes, which could trigger a price crash and set the conditions for a new bubble.
No Bubble In Property Market: NUS Study
Source : The Straits Times, Oct 19, 2007
DESPITE Singapore's red-hot property prices, no bubble is forming in the property market here, according to a study by National University of Singapore (NUS) economists.
FINDING: The rise in home prices is below the market's long-run 'equilibrium' level, according to the study led by Prof Abeysinghe.
In fact, the rise in home prices is below the market's long-run 'equilibrium' level, based on factors such as income and property supply, preliminary findings of the ongoing study show.
In other words, the pace of housing price rises is still below the level that would be expected based on market fundamentals, according to the study conducted by a team led by Associate Professor Tilak Abeysinghe.
This is unlike the case in the early 1980s and mid-1990s, when property price inflation shot up above its long-term equilibrium levels, the study noted.
Early findings from the study, still a work-in-progress, was presented to a small audience at the Singapore Economic Policy conference yesterday.
House-price inflation is expected to hit 18 per cent this year, before easing to 13.7 per cent next year, and then to 3.2 per cent in 2009 and 3.4 per cent in 2010, the NUS team's model predicted.
Factors used to determine the equilibrium price level include disposable income per person, housing stock and the new supply of property.
The study also found that it takes a long time for property price inflation to adjust to its long-run equilibrium.
And a rise in property price inflation would lead to a spike in construction investment a year or so down the road, but its effect fades after that.
The study concluded that price bubbles should be avoided, as they affect private consumption as well as income redistribution, among other things.
Prof Abeysinghe is the deputy director of the Singapore Centre for Applied and Policy Economics at the NUS, which organised yesterday's meet.
The one-day conference also saw speakers examine issues ranging from fertility, migration and labour market trends, to CPF savings and the elderly.
The paper, entitled Singapore's Property Market And The Macroeconomy, can be viewed at http://nt2.fas.nus.edu.sg/ecs/cent/ESU/conference.htm
DESPITE Singapore's red-hot property prices, no bubble is forming in the property market here, according to a study by National University of Singapore (NUS) economists.
FINDING: The rise in home prices is below the market's long-run 'equilibrium' level, according to the study led by Prof Abeysinghe.In fact, the rise in home prices is below the market's long-run 'equilibrium' level, based on factors such as income and property supply, preliminary findings of the ongoing study show.
In other words, the pace of housing price rises is still below the level that would be expected based on market fundamentals, according to the study conducted by a team led by Associate Professor Tilak Abeysinghe.
This is unlike the case in the early 1980s and mid-1990s, when property price inflation shot up above its long-term equilibrium levels, the study noted.
Early findings from the study, still a work-in-progress, was presented to a small audience at the Singapore Economic Policy conference yesterday.
House-price inflation is expected to hit 18 per cent this year, before easing to 13.7 per cent next year, and then to 3.2 per cent in 2009 and 3.4 per cent in 2010, the NUS team's model predicted.Factors used to determine the equilibrium price level include disposable income per person, housing stock and the new supply of property.
The study also found that it takes a long time for property price inflation to adjust to its long-run equilibrium.
And a rise in property price inflation would lead to a spike in construction investment a year or so down the road, but its effect fades after that.
The study concluded that price bubbles should be avoided, as they affect private consumption as well as income redistribution, among other things.
Prof Abeysinghe is the deputy director of the Singapore Centre for Applied and Policy Economics at the NUS, which organised yesterday's meet.
The one-day conference also saw speakers examine issues ranging from fertility, migration and labour market trends, to CPF savings and the elderly.
The paper, entitled Singapore's Property Market And The Macroeconomy, can be viewed at http://nt2.fas.nus.edu.sg/ecs/cent/ESU/conference.htm
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