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UAE 9,000 new Millionaires

The UAE and Saudi Arabia, riding a breathtaking economic boom, led the region's surge in millionaire population, with the Emirates alone adding more than 9,000 new super-rich people within a year.

As the number of high net worth individuals (HNWIs) — individuals with net assets of at least $1 million, excluding their primary residences and consumables — in the world increased 8.3 per cent in 2006 to 9.5 million, the number of millionaires in the UAE grew 15.4 per cent — from 59,000 in 2005 to 68,100 in 2006 — placing the Emirates among the world's top five countries that recorded the fastest growth rate in their super-rich population.

According to the 11th annual World Wealth Report, released yesterday by Merrill Lynch and Capgemini, in the Middle East, Saudi Arabia followed the UAE with its millionaires growing by 11.8 per cent to 89,600.

In 2005, UAE's HNWIs rose 11.8 per cent to reach 59,000 from 52,000 in 2004, making the Emirates home to the second largest concentration of millionaires in the Middle East, a region which recorded the highest growth in HNWI financial wealth at 19.7 per cent. In 2005, Saudi Arabia led the growth in the number of millionaires by posting an increase of 13.5 per cent.

In 2006, while Singapore and India led the millionaire boom with 21.2 per cent and 20.5 per cent surge respectively, Indonesia and Russia came third and fourth in the millionaire population growth rate.

"Driven by a strong global economy, the wealth of the world's high net worth individuals (HNWIs) increased 11.4 per cent to $37.2 trillion in 2006, first double digit growth in seven years," the report by global wealth management company, said while predicting that by 2011 it would cross $52 trillion.

According to the report, in 2006, the number of ultra high net worth individuals (Ultra-HNWIs — individuals with net assets of at lest $30 million) grew by 11.3 per cent to 94,970.

The report said the Middle East was the only region to see a dispersion, rather than consolidation, of wealth as a result of negative market capitalisation growth which in the UAE plunged by 57.3 per cent. "The global demand for oil in 2006 helped increase the number of HNWIs by 11.9 per cent, but a correction in an overvalued stock market pulled down market capitalisation rates, slowing total wealth accumulation."

Noting that the Middle East continued to benefit from relatively high oil prices, the report said that the GCC countries continued to drive wealth creation throughout the region, while negative market capitalisation rates helped decelerate their total wealth accumulations.

"Total HNWI wealth grew by 11.7 per cent in 2006, down from a 19.7 per cent advance in 2005, suggesting a dispersion of wealth among the region's wealthiest individuals."

Imad El Aawar, resident director, Middle East, Merrill Lynch, said while emerging economies proved resilient with continued growth in their HNWI population and solid investor cash flow to riskier corners of the market, that economic growth will slow in 2007 as mature economies grow more moderately.

He said real GDP and market capitalisation 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 realisation 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 GDP growth rates of 10.5 per cent and 8.8 per cent respectively, in 2006.

Market capitalisation 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. For example, the Dow Jones World Index grew by 16.4 per cent in 2006.

"This year's report found that the number of wealthy people, and the amount of wealth that they control, continued to increase in 2006, with extraordinary wealth creation in Singapore and India," said Imad El Aawar, Resident Executive Director Middle East, Global Private Client Group.

"The level of wealth creation around the world provides a tremendous opportunity for wealth management firms, and success will go to the firms that offer a service model that meets the ever-changing needs of today's sophisticated clients."

The BRIC nations (Brazil, Russia, India and China) continued to play increasingly important roles in the global economy in 2006. China and Russia were among the top ten countries with the fastest growing HNWI population. China's HNWI population grew by 7.8 per cent and Russia's increased by 15.5 per cent. Brazil and India also showed continued strength based on domestic private consumption and competitive service and manufacturing sectors.

"The globalisation of wealth creation has accelerated," said Jonty Crosse, Resident Director Middle East, Global Private Client Group. "If 2005 was characterized by a flow of investment to international funds from HNWIs, 2006 ushered in a new era whereby emerging economies leaped ahead with direct foreign investment, strong domestic demand, and hefty stock market gains."

In 2006, HNWIs shifted more money into real estate investments, at times liquidating some of their alternative investments to fund these real estate opportunities. Global direct real estate transaction volumes reached $682 billion in 2006, up 38 per cent from 2005. Real estate investment funds, or REITs, performed strongly to create an overall preferred investment channel. While alternative investments remained a key component of HNWI portfolios, overall HNWI allocations to those investments dipped in 2006.

In its first breakout of philanthropic giving, the report found that HNWIs, led by the ultra-wealthy, gave an estimated $285 billion to philanthropic causes in 2006.

The report found that the global perspective of HNWIs continued to increase in 2006, driven by an expanded awareness of international developments, better international fund performance and risk mitigation. "Looking ahead, mature markets like the United States are expected to act as an anchor on the world economy as moderate growth rates settle in. With many central banks tightening monetary policy, the period of high liquidity that has so stimulated recent growth may soon come to an end. Finally, the growth rates of Asia and Latin America are expected to ease back as global demand slows," said Crosse. (Khaleej Times)

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