Family businesses won't drive wealth growth in Asia, analyst

Family businesses are unlikely to play a big role in driving growth in the number of high net worth individuals in Asia, according to a Hong Kong-based analyst.

Amar Gill, head of special projects research at brokerage and investment group CLSA Asia-Pacific Market, told CampdenFB that family businesses will account for only around 20% to 30% of new wealth created over the next four years.

CLSA Asia-Pacific Market recently published Fat Cats in Fast Lanes: Surge in High Net Worth Individuals, a report prepared in collaboration with Swiss private banking group Julius Baer that suggests that high net worth individuals in Asia, excluding Japan, will grow to 2.8 million from approximately 1.2 million by 2015.

“We made some assumptions about the type of business [the new millionaires] are running and we think that family businesses are not a huge driver of the growth for the wealthy,” said Gill.

According to the report, strong local economic growth, combined with high savings, as well as appreciation of Asian currencies, will lead to a rise in millionaires in Asia.

“Inflation is adjusting nominal GDP growth at about 10% annually, and even considering currency appreciation, Asian economies are growing at about 15% per year,” he said.

“This strong growth and the fact that the Asian saving rate is between 30% and 40% of GDP means that every year just savings on the economy add to the wealth of individuals.”.

Gill anticipates that, while exports to the west are losing importance, Asian companies that are active in intra-regional trading – such as trade from China and north-east Asia to south-east Asia – will grow particularly strongly.