The BRIC Nations See Continued Economic Growth
The BRIC nations (Brazil, Russia, India and China) are playing increasingly important roles in the global economy. Two of these four countries made their way onto the list of the 10 fastest-growing HNWI populations in 2006. MSCI’s BRIC Index gained 52.9% for the year, outpacing MSCI’s G7 Index, which gained 15.7% in 2006. The Organisation for Economic Co-operation and Development predicts continued growth for China,
but sees a slowdown for Brazil and India.
In 2006, the HNWI populations in the BRIC nations grew in number and accumulated wealth. China’s HNWI population, for example, grew by 7.8% in 2006,
while India’s expanded by 20.5%.
Several events contributed to China’s 2006 gains. For example, a flurry of IPO activity on the Shanghai/Shenzhen Stock Exchanges raised 45.0 billion in primary offerings, an amount second only to that raised in the United Kingdom16. China also converted two thirds of its non-tradable shares into tradable shares, creating liquidity in its markets. The effects of unpegging the yuan from the U.S. dollar also began to take hold as the year wore on, helping the currency to slowly appreciate over the course of the year. However, this appreciation was not enough to significantly slow export growth and total output.
Russia’s market capitalization took off in 2006, on the heels of several IPOs and the liberalization of the country’s banking market. Shares of several Russian banks experienced triple-digit performance growth in 200617, benefiting the country’s wealthiest individuals and swelling their ranks by 15.5%.
Brazil saw an increase in private consumption and investment along with a decline in inflation in 2006. At the same time, commodity prices were relatively high — factors that helped drive up the total number of HNWIs in Brazil by 10.1%.
Meanwhile, India continued its strong expansion, with real GDP growth of 8.8% in 2006, thanks to increased private consumption — 9.1% in 2006, up from 6.6% in 2005 — and strong manufacturing and service sectors. Manufacturing led the way with 11.9% growth in 2006. Overall, the country’s HNWI population increased by 20.5% in 2006.
R
eal G.D.P. and market capitalization growth rates — the two primary drivers of wealth generation — accelerated through 2006, which helped to increase the total number of HNWIs around the world as well as the amount of wealth they control. The realization of economic gains on par with those of 2003 and 2004 was led by emerging markets that continued to outperform the rest of the world.
China and India, for example, sustained real G.D.P. growth rates of 10.5 percent and 8.8 percent respectively, in 2006.Market capitalizations grew rapidly in Europe, Asia Pacific and Latin America, driven by strong corporate profits, IPO activity and ongoing foreign investment. Although performance varied across the world, almost all indices posted gains.
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Driven by a strong global economy, the wealth of the world's high-net-worth individuals (HNWIs1) increased 11.4 percent to US$37.2 trillion in 2006, according to the 11th annual World Wealth Report, released by Merrill Lynch and Capgemini. The number of HNWIs in the world increased 8.3 percent in 2006 to 9.5 million and the number of ultra-high-net-worth individuals (Ultra-HNWIs2) grew by 11.3 percent to 94,970.
The report specifically mentions the NRI community. In Asia-Pacific, the non-resident Indian (NRI) community is a key market segment. Successful NRI business owners and professionals are of great interest to wealth management institutions, as they tend to be global in outlook, savvy about the markets in which they live and well-informed about international affairs. Theirs is a close-knit community; members openly discuss investments and provide an excellent base for referrals. Almost all international private banks (and many domestic ones) have identified this rapidly growing segment’s need for specific products and services and have created practice models and advisor teams that specialize in servicing NRIs. Firms closely monitor changes in this community to continuously refine and enhance their NRI practices as they learn more about their client base and as the NRI community matures.
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