Merrill Lynch and Capgemini Release 12th Annual World Wealth Report

Business Wire,  June 24, 2008  

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Assets of High Net Worth Individuals Rise to $40.7 Trillion - Average HNWI Wealth Surpasses $4 Million for First Time

World's High Net Worth Population Now Stands at 10.1 Million; India, China and Brazil have Highest HNWI Population Growth

NEW YORK -- Driven by market capitalization growth in emerging economies, the wealth of the world's high net worth individuals (HNWIs1) increased 9.4 percent to US$40.7 trillion in 2007, according to the 12th annual World Wealth Report, released today by Merrill Lynch (NYSE: MER) and Capgemini. The number of HNWIs in the world increased 6 percent in 2007 to 10.1 million, the number of ultra high net worth individuals (Ultra-HNWIs2) increased by 8.8 percent, and for the first time in the history of the Report, the average assets held by HNWIs exceeded US$4 million.

The global economy had a transitional year in 2007, characterized by sharply opposing macroeconomic environments. While momentum carried over from 2006 helped to sustain unabated growth in the first few months of 2007, the economy faced heightened uncertainty by year-end. Global growth remained solid in 2007, in terms of both real GDP and market capitalization- the two primary drivers of wealth generation. Strong worldwide gains in the first half of 2007 boosted HNWI growth across the globe; while in the second half of the year, resilient emerging economies offset slowdowns in mature ones. The global economy grew by 5.1 percent, down slightly from the 5.3 percent global growth in 2006.

Emerging Economies and BRIC Nations Lead the Pack

Impressive growth of emerging economies was boosted largely by thriving export sectors and heightened domestic demand. The largest regional growth of the HNWI population occurred in the Middle East, Eastern Europe, and Latin America, with increases of 15.6 percent, 14.3 percent, and 12.2 percent, respectively. Gains in commodity exports, paired with growing international acceptance of emerging financial centers as significant global players, contributed to the growth rates of emerging economies.

The BRIC nations (Brazil, Russia, India and China) continued to play pivotal roles in the global economy in 2007, driven by impressive economic gains and robust market capitalization growth.

"This year's Report found that the number of high net worth individuals, and the amount of wealth they control, continued to increase in 2007, with the greatest wealth being created in the emerging markets of India, China, and Brazil," said Robert J. McCann, president of Global Wealth Management at Merrill Lynch. "While trends indicate opportunities exist for wealth management firms to tap into new growth markets, success will go to those that recognize their existing service, delivery and technology strategies must be adapted and tailored to meet the unique needs of these target growth markets."

India led the world in HNWI population growth at 22.7 percent, driven by market capitalization growth of 118 percent and real GDP growth of 7.9 percent. Although India's real GDP growth decelerated from 9.4 percent in 2006, current levels are considered more stable and sustainable. India's two largest exchanges - the Bombay Stock Exchange and the National Stock Exchange - ranked among the world's top 12 exchanges by end of 2007, boosted by initial public offering markets and heightened international interest.

China experienced the second largest expansion of their HNWI population, advancing 20.3 percent - an increase fueled by market capitalization growth of 291 percent and real GDP growth of 11.4 percent. Significant price increases and strong IPO activity propelled the Shanghai Exchange to become the sixth largest exchange in the world in terms of market capitalization.

But while market capitalization and real GDP growth rates were higher in China than India, the HNWI population of India grew faster in 2007. The Report suggests that as market capitalization and real GDP in China were spread over a larger population, there were smaller per capita gains in China. In 2006, India had a larger market capitalization growth than gross national income, significantly impacting HNWI population growth in India. In addition, China is currently experiencing explosive growth in its "mass affluent" population, which has yet to break the HNWI threshold of US$1million.

Brazil enjoyed the third-highest HNWI growth rate in 2007, with a 19.1 percent increase, spurred by a wave of robust market capitalization growth of 93 percent and real GDP growth of 5.1 percent. Net private capital flows to Latin America doubled in 2007, contributing to the Bovespa Stock Exchange's fourth place ranking among the world's largest IPO markets and 7.2 market share gain. This, according to the Report, lent support to the establishment and global integration of the Brazilian financial system.

Russia was home to one of the world's 10 fastest-growing HNWI populations, despite growth deceleration from 15.5 percent in 2006 to 14.4 percent in 2007. Solid gains of 37.6 percent in market capitalization and 7.4 percent in real GDP represented the growing international interest in the country as a global player, suggesting that the ongoing development of Russia's external relationships will likely improve the economy's fundamentals.