What could a Chinese dumpling maker named Li Wei and Bill Gates possibly have in common? They're among a record number of wealthy people who held the title of billionaire in 2006. And, according to Forbes magazine’s annual tally, the billionaire club is growing.
Forbes identified a record 946 billionaires with Microsoft founder Bill Gates ranked No. 1 for the 13th straight year. Twenty are from China, 21 from Hong Kong, 24 from Japan, and India takes the lead with 36 members of the Asian Billionaires Club. How’s that for you’re A B Cs? The 2006 list’s total net worth – an astounding US$3.5 trillion.
And the wealthy aren’t just keeping it in the bank. Forbes says that the rich in China and India, the world's two most populous nations, have also manifested their prosperity in a growing demand for luxury goods - from Louis Vuitton bags to Porsche cars.
China is already the world’s third-largest consumer of luxury goods, behind the U.S. and Japan. The Richemont Group, which is home to prestigious brands including Cartier, Van Cleef & Arpels and Montblanc, witnessed a 64% increase in Chinese group sales for the six months ended September 2006 alone.
Chinese consumers are projected to overtake their U.S. counterparts as early as 2009. What’s more, the fundamentals and longer-term growth trends for most of these economies appear sound, says Song Seng Wun, Regional Economist at CIMB-GK Research.
“The emerging markets have learned from the Asian financial crisis, and are more resilient now,” he says. “Even the Chinese government is constantly tinkering to ensure its economy and markets do not overheat.”
In any case, Song says the wealthy are usually the least affected by economic slowdowns. “Even if their assets lose half their value, most will still be rich enough to buy luxury goods.”
The producers of luxury goods are well aware of this unique situation and are expanding into the lucrative Asian market. Rolls-Royce, for example, is increasing its workforce by roughly 25% to meet demand from China. And Merrill Lynch plans to open more private banking centers in India to tap its growing cash-rich population.
And herein lies an opportunity for investors to cash in on the lifestyles of the Rich and the Very Rich.