Recovery in Singapore wealth market to drive affluent population growth in 2021 and 2022

The Singapore wealth market, especially equities and mutual funds, are expected to rebound in 2021 and 2022 after a pandemic induced contraction in 2020, pushing up affluent investors’ numbers. This population, which includes mass affluent investors (holding liquid assets of US$50,000–$1m) and High-net-worth (HNW) individuals (holding liquid assets of more than US$1m), is expected to grow by 3.4% to reach 1.32 million in 2022, forecasts GlobalData, a leading data and analytics company.

Singapore is one of the main financial hubs of Asia-Pacific and is home to many of the region’s wealthy, with its affluent population expected to account for 28.4% of the city state’s population at the end of 2021.

According to GlobalData’s Wealth Market Analytics, the number of affluent individuals in Singapore recorded an average annual growth rate (AAGR) of 5.6% between 2015 and 2019 on the back of strong financial market performance. 2020, however, negated the growing trend owing to COVID-19, which caused widespread economic turmoil, resulting in decline in this population by 3.1%.

Ravi Sharma, Lead Banking and Payments Analyst comments: “The economy and financial markets continue to recover on the backdrop of a successful vaccine rollout, with the country being one of the most effective markets globally when it comes to managing the pandemic, thereby making the city-state even more attractive for HNW investors in addition to its enduring tax advantages.”

Equities and mutual funds were the most hit sub-sectors with the Straits Times Index (STI) failing to recover losses in 2020 and closing the year down 11.8% against 2019. As the city-state’s mutual funds market has a noteworthy exposure to equities, mutual funds decreased by 0.6% in 2020. However, this decline was not too strong as compared to equities (4.6%), which is not surprising given the diversification benefits mutual funds provide in terms of asset class and geography. On the other hand, Retail deposits registered high net inflows in 2020, benefiting from heightened volatility and uncertainties in other riskier asset classes.

However, the financial market is expected to rebound in 2021 with improving economic conditions. According to the Ministry of Trade and Industry (MTI) announcement in November 2021, Singapore’s GDP growth is expected to be 7.0% in 2021.

Sharma concludes: “With gradual economic recovery and a rise in investors’ confidence, an improvement in financial markets is expected to continue as the investors are shifting away from deposits towards riskier assets such as equities and mutual funds and accelerating the growth of affluent individuals over the next two years.”