ME investors top global list in ’05

DUBAI — Eighty per cent of high net worth individuals (HNWIs) in the Middle East — the world's fastest breeding ground for dollar millionaires — have investments and residences in foreign countries, placing the region's affluent in the forefront of non-domestic asset allocation worldwide.

By Isaac John (Chief Business Reporter)

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Published: Thu 6 Jul 2006, 10:54 AM

Last updated: Sat 4 Apr 2015, 2:58 PM

The region — which recorded the highest growth in HNWI financial wealth at 19.7 per cent in 2005 to 300,000 with combined wealth of $1.2 trillion — is way ahead of Europe where 46 per cent of millionaires claim residences in another country, according to the recent edition of the World Wealth Report. This growing interest in real estate investments abroad places the Middle East's HNWIs as a leading force in the globalisation of assets.

While Saudi Arabia led the growth in the number of millionaires by posting an increase of 13.5 per cent to 80,100, with 59,000 millionaires, the UAE, recording a surge of 11.8 per cent, was home of the second largest concentration of millionaires in the region. Although the UAE accounts for less than one per cent of world's total HNWIs, one out of every 85 people living in the Emirates — where the total population rose to five million — is a dollar millionaire.

Another key driver of HNWI wealth growth in the UAE was the sharp rise in local asset prices, particularly the property and equity markets during 2005. "However, for 2006 and beyond, non-oil industrial production is expected to be a more important growth driver in the UAE, which recorded a high GDP growth last year." While the International Monetary Fund (IMF) announced that UAE's GDP grew by 8.5 per cent in real terms in 2005 due to strong growth in non-oil sectors the Emirates' Ministry of Economy recently said that the country's nominal GDP grew by 26.4 per cent last year. Local economists, meanwhile, estimate the inflation rate to be between 15 and 20 per cent.

According to the report, HNWI investors in the Middle East also showed a strong appetite for risk in 2005. "As a result, HNWIs' asset allocation was highly skewed into equities and real estate. However, at the same time, increased bond issuances suggest an increased interest in this form of fixed income investment."

Middle East's HNWIs are also ranked in the forefront in terms of inheritance of wealth. While worldwide, business ownership or the sale of a business is the primary source of wealth (37 per cent) for the majority of the world's HNWIs, in the Middle East, 32 per cent of the affluent have derived their wealth through inheritance.

The World Wealth Report, which was recently released by Merrill Lynch and Capgemini, said the Middle East region's growth is impressive compared to the 8.5 per cent global growth in the wealth of high net worth individuals to $33.3 trillion in 2005.

The number of HNWIs worldwide grew by 6.5 per cent over 2004, to 8.7 million, and that the number of Ultra-HNWIs — those who have financial assets of more than $30 million — grew by 10.2 per cent, to 85,400 in 2005.

While the Middle East region recorded the highest growth rate in HNWI wealth, Africa came second with 14.5 per cent growth, Latin America 11.8 per cent, North America 9.4 per cent, Asia Pacific eight per cent and Europe 4.9 per cent. However, according to forecast, the Middle East region will record the fastest annual growth in HNWI wealth in the coming three years. While HNWI wealth worldwide is projected to total $44.6 trillion, growing at six per cent, the Middle East, accounting for 65 per cent of the world's oil reserves, will record eight per cent growth.

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