Mumbai, September 25, 2008 : There were an estimated 123,000 millionaires (HNWIs) in India at the end of 2007, up 22.7 percent from a year earlier, according to the third annual Asia-Pacific Wealth Report published by Merrill Lynch and Capgemini.

The growth in India’s HNWI population was the fastest worldwide and exceeded gains of 22.7 percent a year earlier. Last year, the combined wealth of India’s HNWIs rose 25.7 percent to US$440 billion. HNWIs are individuals with more than US$1 million in net assets, excluding their primary residence and consumables.

Rapid economic expansion, increased foreign investment and gains on the country’s stock markets fueled the jump in India’s HNWI population last year. Indian HNWIs allocated 36 percent of their assets to equities, among the highest in the nine regional markets covered by the report.

“Despite dislocations in developed markets, the number of high net worth individuals in India grew at a faster rate than the global average,” said Pradeep Dokania, head of Global Wealth Management for DSP Merrill Lynch. “Domestic demand and Asia’s appetite for commodities continue to drive wealth accumulation in India.”

According to the 2008 Report, the average net worth of Indian HNWIs rose slightly to US$3.6 million, compared with US$3.4 million for the Asia Pacific region. The global average was US$4 million.

The number of Asia-Pacific HNWIs expanded to 2.8 million at the end of last year, an increase of 8.7 percent and exceeding the global growth rate of 6 percent. The region was home to 27.8 percent of the world’s HNWI population. The report covered nine key markets in Asia Pacific: Australia, China, Hong Kong, India, Indonesia, Japan, Singapore, South Korea and Taiwan.

The region’s wealthy held a combined US$9.5 trillion in financial assets, up 12.5 percent from a year earlier and making up 23.3 percent of global HNWI wealth.

India, China Lead the Way

For the third straight year, Asia Pacific dominated the list of the world’s 10 fastest-growing markets for HNWIs, taking five of the top spots. India led the way, followed by China which saw a 20.3 percent increase. South Korea, Indonesia and Singapore posted gains of 18.9 percent, 16.8 percent and 15.3 percent, respectively.

The number of Ultra-HNWIs in Asia Pacific jumped 16.4 percent to 20,400 last year, nearly double the 8.8 percent global growth rate. India was home to about 1,081 Ultra-HNWIs, or individuals with more than US$30 million in financial assets. Their combined wealth broke through the US$100 billion barrier for the first time, jumping 27.1 percent to US$116 billion.

“Emerging markets are benefiting from recent reforms to the financial services industry and increases in foreign direct investment from international markets, such as the US, UK and Middle East,” said Wayne Li, Senior Manager, Capgemini’s Financial Services Strategic Business Unit. “As long as the region remains an engine of wealth creation, local and foreign investors will continue to pursue investment opportunities in the region.”

The Asia Pacific region also saw an increase in Emerging-HNWIs, or individuals with between US$750,000 and US$1 million in investable assets. The number of Emerging-HNWIs in Asia Pacific rose 6.9 percent last year, versus the global rate of 5.2 percent. In particular, China’s emerging affluent class grew at 19.9 percent.

“The report paints a consistent picture of growth for the Asia Pacific region,” said Antony Hung, Head of Pacific Rim Wealth Management at Merrill Lynch. “Strong domestic demand and a growing entrepreneurial class continue to spur wealth creation in this part of the world, presenting tremendous opportunities for wealth management providers.”

Drivers of Wealth

Economic growth and stock market returns were the key drivers of wealth accumulation in the Asia Pacific region last year.

Two-thirds of the markets covered in the report expanded their economies at a faster rate than the global average, with China and India reporting 11.4 percent and 7.9 percent real GDP growth respectively. Despite deteriorating global economic conditions in the second half of 2007, robust domestic demand buoyed growth in most Asia-Pacific economies.

“With strong fundamentals and a booming young population, India continues to accelerate ahead on the path of economic growth. Our analysis shows that in 2007, India’s HNWI population experienced the highest growth worldwide in 2007, expanding it by 22.7%” said Salil Parekh, CEO, Capgemini India.

As investors shifted funds away from troubled mature markets in favor of their stronger, emerging counterparts, Asia-Pacific markets welcomed increased investment activity in the second half and enjoyed impressive gains. In addition, savings rates, as a percentage of GDP, were higher in Asia Pacific than most developed markets.

Asset Allocations Vary by Market

Market uncertainties in the second half of 2007 prompted Asia-Pacific HNWIs to shift their assets to safer, less volatile asset classes. Last year, the region’s wealthy allocated 46 percent of their holdings to cash/deposits and fixed-income securities, an increase of seven percentage points from 2006.

Asia-Pacific HNWIs cut their exposure to real estate but the asset class remained a significant source of wealth for high-net-worth investors in the region. They held 20 percent of their assets in real estate last year, compared with the 14 percent global average.

Within the region, asset allocations differed from market to market. Australian HNWIs, for example, held 38 percent of their assets in equities, the highest in the region. Investors in India, Hong Kong and Singapore also had relatively high equity allocations.

South Korea’s HNWIs continued to allocate the highest percentage of their holdings to real estate, putting 40 percent of their investments in the asset class. Unlike other investors in the region, Australian HNWIs increased their real estate allocations by one percentage point last year, driven by gains in the local property market.

Opportunities at Opposite Ends of the Wealth Spectrum

Competition for high-net-worth clients has prompted wealth management providers to look more closely at Emerging-HNWIs and Ultra-HNWIs. In 2007, these groups experienced significant growth both in terms of numbers and their combined wealth. In India, Emerging-HNWI wealth increased by 22.1 percent to US$35 billion, and the assets of Ultra-HNWIs broke through the US$100 billion barrier for the first time.

“Both local and foreign providers in the region recognize the potential of Emerging-HNWIs and Ultra-HNWIs and are looking for ways to improve their priority and private banking models to better serve these segments” said Wayne Li, Senior Manager, Capgemini Financial Services. “Providers are also cognizant they must maintain a differentiated value proposition across the segments so as not to dilute their service offerings for higher wealth tiers.”

Looking Ahead

While growth prospects in the near term may be compromised by the global slowdown, the long-term potential of the Asia-Pacific HNWI marketplace remains strong. The region’s HNWI wealth is projected to reach US$13.9 trillion by 2012, growing at an annual pace of 7.9 percent and slightly ahead of the 7.7 percent global rate. By 2012, Asia Pacific is expected to replace Europe as the second-largest regional repository of HNWI wealth.

In 2009, Asia-Pacific HNWIs are likely to turn to fixed-income securities that offer less volatile returns. They are also expected to increase their allocations to alternative investments, mainly in the form of hedge funds or other investments, more suited to uncertain market conditions.

About Merrill Lynch

Merrill Lynch is one of the world’s leading wealth management, capital markets and advisory companies, with offices in 40 countries and territories. The firm has commanding positions around the world in its complementary core businesses: Global Wealth Management, which is comprised of Global Private Client and Global Investment Management, and Global Markets and Investment Banking.

Merrill Lynch’s Global Wealth Management group is a leading international provider of wealth management and investment services for individuals and businesses. With more than 750 offices, approximately 16,700 Financial Advisors and US$1.6 trillion in client assets, it is the largest business of its type in the world. The Private Banking and Investment Group at Merrill Lynch is comprised of more than 166 private wealth advisor teams that utilize global resources to provide financial advisory, banking, and trust services to America’s ultra high net worth families.

As an investment bank, Merrill Lynch is a top global underwriter and trader of securities and derivatives across a broad range of asset classes and serves as a strategic advisor to corporations, governments, institutions, and individuals worldwide. Merrill Lynch owns approximately half of BlackRock, one of the world's largest publicly traded investment management companies, with more than $1.4 trillion in assets under management at June 30, 2008.

About Capgemini

Capgemini, one of the world's foremost providers of consulting, technology and outsourcing services, enables its clients to transform and perform through technologies. Capgemini provides its clients with insights and capabilities that boost their freedom to achieve superior results through a unique way of working - the Collaborative Business Experience - and through a global delivery model called Rightshore®, which aims to offer the right resources in the right location at competitive cost. Present in 36 countries, Capgemini reported 2007 global revenues of €8.7 billion and employs over 86,000 people worldwide.

Leveraging deep industry expertise with the power of Rightshore® global delivery, Capgemini can meet the increasingly sophisticated needs of the financial services sector. With a network of 15,000 professionals working for more than 900 clients worldwide, Capgemini’s Financial Services Sector provides transformational solutions in Banking, Insurance and Capital Markets with industry recognized thought leadership.

For more information visit www.capgemini.com/financialservices. For local websites and our strategic partners in Asia-Pacific, please visit www.capgemini.com/locations/asia_pacific..