ST : Investment gains creating many more millionaires

Jun 24, 2010

Investment gains creating many more millionaires

New study supports earlier report of big increase in rich-list

By Gabriel Chen & Fiona Chan

THE rebounding share market and surging real estate prices have sent the number of millionaires here rocketing over the past two years, says a new study.

The number of people meeting the millionaire criteria jumped 32.7per cent from about 61,000 in 2008 to 80,947, according to estimates from Merrill Lynch Wealth Management and Capgemini.

A millionaire is defined as a person with net assets of at least US$1 million (S$1.39million), excluding his main residence and everyday possessions.

The new report reflects the findings of a recent Boston Consulting Group (BCG) report, which estimated that 11.4per cent of Singapore's households - about 125,000 - owned more than US$1 million as at the end of last year.

While numbers differ, observers agree that the sharp rise is largely because the well-heeled here invested heavily in stocks and real estate and caught the wave of the rebound.

Both sectors were hammered in the financial crisis but performed better last year when economic conditions improved.

Take the MSCI index of Asia-Pacific stocks traded outside Japan. It rose nearly 70per cent last year - its best performance since 1993.

And Knight Frank's Wealth Report 2010 showed that the prices of luxury residences here rose 17per cent last year.

Another reason for Singapore's good showing in the wealth stakes is that people here generally have a much better savings rate than a lot of countries with higher average incomes.

That meant that when the crisis came, Singaporeans did not suffer too badly when their asset values fell.

'A rising tide lifts all boats,' said Mr Nick Pollard, chief executive of private bank RBS Coutts Asia, yesterday.

'With Asia recovering more quickly than most other regions, the net worth of private clients in this region has also risen as their investment portfolios are largely concentrated in Asia.'

The Merrill Lynch and Capgemini report uses data on income distribution provided by the World Bank, Global Insight, the Economist Intelligence Unit and national statistics from surveyed countries.

It then uses what is known as Lorenz curves to distribute wealth across the adult population in each country.

Economists say the methodology is sound but could be improved.

'Year-on-year changes are very fleeting, so maybe a better way of looking at it would be a wider longer-term trend,' said Barclays Capital economist Leong Wai Ho.

Mr David Cohen, economist with Action Economics, said that 'it's not that out of line to estimate that the wealth distribution here is roughly in line with other developed countries'.

'In any case, the major message is how much things have improved from a year ago, and I think that's certainly the correct conclusion.'

Private bankers say there are indeed more rich people around, pointing to the growing numbers of newly minted Singaporean citizens from India and China, many of whom are professionals and entrepreneurs.

Anyone looking for advice on how to break into the millionaire ranks should see how assets like stocks and property can drive wealth creation.

Relying on income growth alone may not be the surest way to strike it rich. After all, the latest figures from Singapore's taxman show that there were just 3,838 taxpayers who earned more than $1million in 2007.

'Asset allocation is very important and it's one of the key things in all financial planning,' said Mr Paul Chan, a former president of the Insurance and Financial Practitioners Association of Singapore.

'Of course you can't put all your money into property, but holding on to cash won't make you a millionaire.'