Peter's Perspective
14th August 2014 by Peter Churchouse

The Multimillionaires Circle

A small newspaper article I spied last week caught my attention.

The piece reported on a survey undertaken by New World Wealth that added up the numbers of multimillionaires in major cities around the world.

To join this club you need net assets of US$10 million. This excludes primary residence from the calculations.

This report tells us that Hong Kong has the largest number of multimillionaires of any city at 15,400, with New York next at 14,300 followed by London at 9,700. Singapore ranks number six at 6,600.

Top 10 cities with the most multimillionaires

For Hong Kong this number is simply wrong in my opinion. It massively underestimates the true numbers.

Just looking outside the window where I am writing this tells me so. This city is jammed with mid to high rise buildings. Thousands of them. Yes, some are owned by listed companies, but this is a very small minority.

Hong Kong and Singapore are not like New York and London where large swathes of the commercial real estate stock is owned by pension funds, insurance companies and the like.

No, in Asia, the great bulk of these buildings are owned by individuals, families, and private companies. And ALL of these buildings are worth multiples of US$10 million. That is before you consider the mountains of industrial buildings, not to mention the thousands of local shops, most of which are owned by private individuals or small to mid-sized family owned companies.

Heck, just on the street outside our building there are about 40 street level shops. This is NOT prime grade A retail! I’m talking about a few clothes shops, a stationary shop….. and one that sells just flip flops! The vast majority of these shops on this 100 meter stretch of road are owned by families or individuals. And most are worth at least US$5 million or more. At least! And this is just one tiny stretch of street in central.

And then there are the thousands of individuals, families who own portfolios of residential properties around these cities. Owning three or four decent apartments would likely put you in the multimillionaire bracket. And again, Hong Kong people don’t leverage up much compared to the western world.

Look at the stock markets. Hong Kong has 1,748 listed companies, the great bulk of which are family controlled, holding more than 50% of the shares. Shares may be held by several or many family members. 65% of these companies have US$100+ million market caps. Trading on these markets is largely made up of private individuals rather than institutional money. You have to think that large numbers of these private individuals hold valuable portfolios of shares, local and foreign.

No, my instincts and experience tell me that the numbers of multimillionaires in these cities is multiples of what the survey suggests. I think the true figure for Hong Kong is at least 3 times that amount…. 45,000 people qualifying for the multimillionaires club.

The growth and focus on private wealth management by banks, consultants and fund managers also suggests that I might be closer to the mark than this survey.

Good Investing,

Peter

P.S. If you would like to read and receive specific investment recommendations, try a 50 day risk-free trial of The Churchouse Letter.

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