The country’s gross financial assets and net financial assets rose in the past year by 6.5% and 7.5% respectively

by NUR HAZIQAH A MALEK / pic by BERNAMA

MALAYSIA was ranked 35th richest country by net financial assets per capita and ranked 31st for gross financial assets per capita according to the Allianz Global Wealth Report 2020: Wealth Immunity.

The country’s gross financial assets and net financial assets rose in the past year by 6.5% and 7.5% respectively.

“The gross financial assets of Malaysian households rose by 6.5% in 2019, a tad faster than in 2018 which was 5.1%, but still well below the average growth of 8.8% since the global financial crisis (GFC).

“Net financial assets, finally, increased by 7.5% in 2019. With net financial assets per capita of €9,944, Malaysia climbed one rung to 35th place in the ranking of the richest countries,” the report noted.

The GFC referred to is the global financial crisis that occurred in 2007-2008.

Throughout 2019, growth in insurance and pensions slowed down, while bank deposits grew weakly during the year.

“Growth in insurance and pensions, on the other hand, the most popular asset class with a portfolio share of 39.4%, slowed down to 8.1%, from 15.7% in the year before.

“The weakest growth, however, showed bank deposits (portfolio share: 32%) which increased by a meagre 3.8% in 2019,” the report said.

In addition, liabilities showed slightly higher growth from 4.7% to 5.3%.

Accordingly, the debt ratio (liabilities in percent of GDP) climbed again to 81.9%; although this value remains almost five percentage points below the peak in 2015, it is way above the regional (55%) and global averages (65%),” it said.

The insurance company’s report puts the asset and debt situation of households in nearly 60 countries together, seeing 2019 clocking in the strongest growth in gross financial assets at 9.7% since 2005, despite witnessing social unrest, escalating trade conflicts and an industrial recession.

“As central banks reversed course and embarked on broad-based monetary easing, stock markets decoupled from fundamentals and soared by 25%, lifting financial assets in the process: The asset class of securities increased by a whopping 13.7% in 2019; was never growing faster in the 21st century,” it noted.

The growth rates of two main asset classes — insurance and pensions, and bank deposits — however, were lower but still impressive at 8.1% and 6.4%, also clocking growth higher above the longterm averages since the GFC.

A peculiar growth was noted in 2019 whereby the fastest growth was recorded by the richest regions: North America and Oceania, with both regions recorded an increase of gross financial assets by 11.9%.

This led to the widening gap between the rich and poor, as the number of members of the global wealth middle class has fallen to below 800 million in 2019, versus one billion in the previous year.

Allianz senior economist and report co-author Michaela Grimm said the widening gap is quite worrying before Covid-19 hit the world.

“Because the pandemic will very likely increase inequality further, being a setback not only to globalisation, but also disrupting education and health services, particularly in low-income countries.

“If more and more economies are turning inwards, the world as a whole will be a poorer place,” she said.

According to the report, Covid-19 has plunged the world economy in its deepest recession in 100 years, as central banks and fiscal authorities fired up unprecedented monetary and fiscal bazookas to protect households and financial assets.

“We estimate private households have been able to recoup their losses of the first quarter and recorded a slight 1.5% increase in global financial assets by the end of the second quarter of 2020 as bank deposits, fuelled by generous public support schemes and precautionary savings, increased by a whopping 7%.

“Very likely, private households’ financial assets can end 2020, the year of the pandemic, in the black,” the report said.

Allianz chief economist Ludovic Subran said monetary policy has saved the day, for now, noting the non-sustainable zero and negative interest rates as undermining wealth accumulation and aggravating social inequality.

“Saving the day is not the same as winning the future. For that, we need more than ever structural reforms post-Covid-19 to lay the foundations for more inclusive growth,” he said.

Regardless, the report noted that emerging markets recorded an increase in wealth when adjusted to population growth.

The global middle wealth class grew by almost 50% and the high wealth class by 30%, while the lower wealth class declined by almost 10%, it noted.

Despite the growth, however, the world remains unequal.

The richest 10% worldwide — 52 million people in the countries in scope with average net financial assets of €240,000 (RM1.17 million) — together own roughly 84% of total net financial assets in 2019.

Among them, the richest 1% — with average net financial assets of above €1.2 million — own almost 44%, the report said.