Wealth in Malaysia: Sizing the Market Opportunity

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The small but fast-developing Malaysian wealth market slowed down in 2015 as global economic trends – particularly weak growth in China and falling oil prices – negatively impacted retail investment values. Fortunately, the market continued to grow and expand as a proportion of the population, and although the heady growth rates of recent years are largely a thing of the past, wealth managers can still rely upon steady expansion within the country’s investor class.

Scope

The affluent investor class in Malaysia will number 1 million individuals by 2017, adding almost 200,000 people to the market.

 Going forward, the proportion of retail investments in deposits is set to fall, highlighting the continued evolution of Malaysian investment preferences.

 HNW investors have led the way in branching out into more sophisticated investments, with roughly one quarter of their onshore liquid wealth held in non-traditional investments as of 2015.

 Given its proximity and range of sophisticated investments Singapore remains a constant draw for Malaysian wealth, particularly for HNW individuals.

Reasons to Buy

Benchmark your share of the Malaysia wealth market against the current market size.

Forecast your future growth prospects using our projections for the market to 2019.

Identify your most promising client segment by analyzing penetration of affluent individuals in Malaysia.

Evaluate your HNW proposition by understanding how FATCA and CRS are affecting your HNW clients.

Review your offshore strategy by learning HNW motivations for offshore investments and their preferred booking centers.

Table of Contents

EXECUTIVE SUMMARY

The Malaysian wealth market weathered a rough 2014 well

Key findings

Critical success factors

SIZING AND FORECASTING THE MALAYSIAN WEALTH MARKET

Malaysia is developing as a financial center and as a wealth market

The affluent population is still shy of the 1 million mark

Investible assets are concentrated within the upper tiers of the wealth market

DRIVERS OF GROWTH IN THE MALAYSIAN WEALTH MARKET

The retail investment market will see strong growth

Retail investments are expected to experience improved growth into the future

The Malaysian investment market is more developed than most markets in Asia Pacific but its retail sector is still focused on deposits

Growth will be healthy across all asset classes, but investors will turn to mutual funds going forward

Retail deposit growth will continue to outstrip GDP growth

Deposit growth moderated in 2015 but will pick up over the forecast period

Economic growth will be steady rather than spectacular, but will sustain growth in deposits

The robust bond growth of 2015 will not persist, returning to 2014 levels

Local wealth managers are highlighting their fixed income offerings

Equities and mutual funds will rebound to stronger growth in 2016

The Kuala Lumpur Stock Exchange suffered in 2015

Equities are a major asset class but have not experienced widespread take-up among consumers

Mutual funds in Malaysia are mainly equity and bond plays

HNW INVESTMENT PREFERENCES

Onshore HNW portfolios are concentrated in simple traditional assets

Just under one quarter of Malaysian HNW assets are in non-liquid asset classes

Offshore banking is a not insignificant drain on onshore assets

Offshore investments among HNW investors is slightly below the Asia Pacific average

The lack of onshore investment options is preventing wealth from coming home

Australia, Singapore, and Hong Kong are the primary beneficiaries of offshore investment

APPENDIX

Abbreviations and acronyms

Supplementary data

Definitions

Affluent

Domicile

DTA

FATCA

HNW

Liquid assets

Bonds

Cash

Deposits

Equities

Mutual funds

Mass affluent

Onshore

Residency

Sharia investments

TIEAs

Methodology

Global Wealth Model methodology

The main sub-model

Global Retail Investments Analytics methodology

Verdict Financial's 2015 Global Wealth Managers Survey

Bibliography

Further reading

About Verdict Financial

Disclaimer

Table

Table 1: Malaysia: adult population segmented by affluent category and asset band (000s), 2009?14

Table 2: Malaysia: adult population segmented by affluent category and asset band (000s), 2015e?19f

Table 3: Malaysia: total liquid wealth segmented by affluent category and asset band ($bn), 2009?14

Table 4: Malaysia: total liquid wealth segmented by affluent category and asset band ($bn), 2015e?19f

Table 5: Malaysian ringgit-US dollar exchange rate, December 31, 2014 and December 31, 2015

Figures

Figure 1: The core affluent investor market remains restricted to a tiny (but growing) elite

Figure 2: More than half of all financial assets in Malaysia are held by mass affluent investors

Figure 3: Growth moderated in 2015, reflecting a weaker oil and gas sector, but is expected to improve in 2016

Figure 4: Deposits dominate Malaysian investors' onshore holdings

Figure 5: The outsized share of deposits in the Malaysian market has held back growth

Figure 6: Retail deposits should see steady growth over the forecast period, but the heights of 2011?12 are behind the market

Figure 7: Bond growth was healthy in 2015, but a return to 2014 growth seems likely

Figure 8: The stock market in Malaysia has struggled since 2013

Figure 9: Equities and mutual funds will see stronger growth in 2016

Figure 10: Mutual funds in Malaysia are still mainly a way to gain equity exposure

Figure 11: HNW investors have been relatively open to alternatives, strongly favoring property

Figure 12: HNW Malaysians rank well below other Asia Pacific markets in terms of offshore investments, but the share is increasing

Figure 13: Perceptions of a better range of investments compels HNW investors to book assets abroad

Figure 14: Local booking centers attract the bulk of Malaysian offshore investment

Figure 15: Malaysia has pursued comprehensive DTAs

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