MAC: Mines and Communities

London Calling examines a "unique" global survey of the rich

Published by MAC on 2011-10-10
Source: Statement, Reuters (2011-10-07)

... and where they're putting their cash

There are more affluent "households" in the US than any other country, according to a recent study by the London-based TNS, based on interviews with 12,000 people in 24 countries. See:

http://www.tnsglobal.com/news/news-E3D2655B5DD64D8A8E04BBD057060B66.aspx

That's hardly rocket science. But what may surprise us is the study's conclusion that, taken on an individual basis, rich Chinese, Arabs in the UAE, Indians and Singaporeans, now have at least as much - if not more - money to invest as their counterparts in Europe.

A caveat must be entered here: the study is far from global. Apart from citizens of the Czech Republic, no eastern Europeans were interviewed. Although some interviews were conducted in Brazil,  other Latin American nations weren't included.

So, for example, TNS appears to have ignored the investment preferences of Mexico's Carlos Slim, the world's fattest capitalist cat (according to Forbes March 2011 "global billionaires" list), whose personal wealth is estimated at around US$74 billion and who heads the minerals conglomerate Grupo Caruso.

What types of investments are being backed by such mega bucks?

According to TNS there are "big differences between markets, even when they border each other geographically: only 5% of Norwegians invest in bonds, compared to 31% of the Swedes. And while the popularity of commodities fluctuates at a global level, they are very popular among India's affluent. These are the insights that make all the difference when trying to engage the wealthy with a specific product or service."

Men on their metals

As to the nature of those financial "products" TNS finds that "[w]hile the Chinese, Indian and German affluent are keen investors in precious metals (cited by 35%, 33% and 23% of respondents respectively), this falls to just 3% in Sweden, Norway and the Netherlands, and 2% in Denmark and Israel."

Once again, we should treat the figures with some caution, since they aren't dis-aggregated. Over the last 3-4 years Chinese entrepreneurs have, for sure, mined or purchased more new gold than citizens in any other country (with Indians falling not far behind).

On the other hand, London-listed Fresnillo plc is the world's biggest producer of primary silver; it's majority-owned by Mexico's Grupo Bal which is headed by Alberto Bailleres, whose fortune was valued by Forbes at US$11.5 billion in March 2011. Also, the biggest investors in silver of late (as revealed by Sprott Asset Management in June this year) appear to have been JP Morgan and the UK's largest bank, HSBC.

The world's main producers of platinum group metals (PGM) are located in Russia (where Norilsk is the main miner) and in South Africa (where extraction is led by Anglo American). Between them they control around 80% of global PGM output; and their prime investors are Russian oligarchs and men from South Africa, UK and western Europe.

However, "developing" country billionaires are almost certainly devoting some of their gains to precious metals' Exchange Traded Funds (ETFs) which now hold huge amounts of physical gold, silver and platinum. Unfortunately, ETF fund managers don't reveal who subscribes to them, nor where those individuals are located.

It will "take some time before we really see a shift from West to East" says TNS. Its study identifies the "incidence of affluence" in the U.S. as being no less than 27 per cent, 20 per cent in Canada and 11 per cent in the U.K., "while the proportion in China is 0.75 per cent [and] India's affluent make up 1.25 per cent of the country's population".

Moreover, just three states - the U.S., Japan and Germany - between them account for more than half the world's millionaires.

Nonetheless, says Reuters in a separate report (see below), a global study of wealth published this year by Merrill Lynch and global consulting firm Capgemini, " found China has the world's fourth-largest population of millionaires."

Going West

Companies and funds based in the global North continue attracting the bulk of mining and minerals-directed investment.

But, as we know from scrutinising both the amounts, and direction, of capital expenditure coming from India, mainland China, Hong Kong, the UAE and Singapore, the balance of overall control over the worlds' remaining mineral troves has begun to change.

Among the world's Top Mining Multinationals, Rio Tinto already has a Chinese company, Chinalco, as its largest shareholder (at around 9%), while Vale, the world's premier iron ore miner, is controlled by a joint venture headed by Brazilian government pension funds. Leading copper producer, Codelco, is still owned by the Chilean government - but there's growing domestic pressure to sell-off some of its assets.

And there are plenty of mid-cap mining companies still waiting to be lapped up by potential investors from the Global South.

Biggest Ever Study of Global Affluence Shows 80% of World's Wealthy are Still in the West

6 October 2011

United Kingdom

TNS's Global Affluent Investor reveals chequered picture of world affluence

London - World-leading research company TNS has today unveiled the results of the biggest global study into the attitudes and investment priorities of the affluent - painting a timely picture of wealth, post global recession.

While the United States still ranks as the world's most prosperous country, with 31m affluent households, the study reveals that the emerging economies of India and China have overtaken many European countries in this measure of consumer wealth.

Based on interviews with 12,000 people across 24 markets including China, Brazil and India, TNS's Global Affluent Investor study shows that the growth of developing economic powerhouses is already starting to impact personal fortunes, among households with more than $100,000 investable assets[1].

It also shows that emerging markets now rival their developed counterparts in terms of the amount that people have to invest. UAE and India appear in the top five countries where the affluent have more than $1m investable assets on average, alongside Singapore and Hong Kong. The only Europeans to feature in this top five are the Swedish, whilst the UK and France are the least likely in Europe to have these levels of investable assets.

While incidence of affluence would naturally be higher in small, wealthy countries like Luxemburg (29%) and Singapore (20%), there are huge contrasts in markets with large populations; while 27% of the US are affluent this falls to around 1% in India and China. This demonstrates a great contrast in wealth distribution within emerging markets, even where the actual number of affluent households is high and highlights a need for very precise marketing strategies to reach the right audience.

Reg van Steen, Director Business and Finance, TNS, comments: "When examining global incidence of affluence, it's not only size that matters. We wanted to identify the growth potential of each market - and our research confirms that emerging markets will become new centres of affluence in coming years. India and China have already surpassed major European markets like Germany and France. It's interesting to see that the entrepreneurial spirit of people in these markets is already paying off in terms of personal wealth."

Fundamental social shifts are unearthed when examining the demographics of the world's affluent. While they average 57 years old in North America and Northern Europe, this falls to the early 40s in Australia, Singapore and Hong Kong. While men are the primary decision makers among affluent households in India (80% men) and Central Europe (79%), the balance is spread far more evenly in North America (45% men).

TNS's findings also demonstrate regional contrasts in terms of what the affluent actually invest in. While the Chinese, Indian and German affluent are keen investors in precious metals (cited by 35%, 33% and 23% of respondents respectively), this falls to just 3% in Sweden, Norway and the Netherlands, and 2% in Denmark and Israel.

Reg van Steen continues: "Despite today's pan-global financial trends, it's important to recognise the diversity in local preferences when it comes to asset allocation. We detected big differences between markets, even when they border each other geographically: only 5% of Norwegians invest in bonds, compared to 31% of the Swedes. And while the popularity of commodities fluctuates at a global level, they are very popular among India's affluent. These are the insights that make all the difference when trying to engage the wealthy with a specific product or service."

(London-based TNS says it is "the world's largest Custom Market Research specialists. We provide quality marketing information delivered by Global Industry Sector expert consultants, innovative Market Research Expertise across the product life-cycle, in 80 countries").


U.S. affluent classes dwarf China and India

Reuters

7 October 2011

LONDON - The United States has 10 times more affluent households than China or India, research shows, undermining arguments the global economy can be sustained by consumption in emerging markets.

A survey of affluent households around the world -- defined as having wealth of more than $100,000 -- by research firm TNS found 80 percent of such people live in Western countries.

While the number of affluent households in China and India is three million each, the U.S. has more than 31 million, the survey shows.

The results challenge hopes that the boom economies of Asia can supplant an ailing U.S. as the world's consumer of last resort, and keep global growth ticking over.

Reg van Steen, a director of business and finance at TNS, said researchers had to drop the wealth threshold to $40,000 for Brazil to make it possible to find a large-enough sample.

"What really surprises is China has surpassed Germany, France and the U.K. when it comes to the number of affluent. (But) it will take some time before we really see a shift from West to East," he said.

The number of households with more than $100,000 in liquid assets stands at 2.9 million in the U.K., 2.5 million in Germany and 2.7 million in France, the survey of 12,000 people in 24 countries found.

The study also highlights the tiny proportion of overall population taken up by the affluent middle classes in China and India compared with developed countries.

The incidence of affluence in the U.S. is 27 per cent, the study shows, 20 per cent in Canada and 11 per cent in the U.K., while the proportion in China is 0.75 per cent. India's affluent make up 1.25 per cent of the country's population.

A global study of wealth published this year by Merrill Lynch and global consulting firm Capgemini found China has the world's fourth-largest population of millionaires.

However, the top three -- the U.S., Japan and Germany -- account for more than half of the world's millionaires.

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