Wealth in Singapore: Sizing the Market Opportunity 2017

Table of Contents

1. EXECUTIVE SUMMARY 2

1.1. Singapore’s small domestic wealth market is as attractive as its large offshore sector 2

1.2. Key findings 2

1.3. Critical success factors 2

2. SIZING AND FORECASTING THE SINGAPOREAN WEALTH MARKET 8

2.1. While primarily a major offshore center, Singapore also has a substantial onshore element 8

2.1.1. Offshore investors do not book in Singapore to keep their funds in deposits 8

2.2. Favorable domestic conditions will drive further expansion in onshore wealth 9

2.2.1. A third of Singapore’s population will be classed as affluent by 2020 9

2.2.2. The bulk of Singapore’s onshore wealth is concentrated in the hands of the affluent 12

2.2.3. HNW portfolios above $10m in AUM will experience the highest growth 13

2.3. Illiquid wealth accounts for a much greater bulk of households assets in Singapore 15

2.3.1. Households have been growing the proportion of wealth in the securities markets 15

2.3.2. CPF balances are a growing pool for wealth managers to consider 16

3. DRIVERS OF GROWTH IN THE SINGAPOREAN WEALTH MARKET 17

3.1. Total retail investments growth accelerated again in 2016 17

3.1.1. Growth in retail savings and investments will rise into 2017 17

3.1.2. Onshore wealth is still largely a deposit game – a stabilizing factor for future savings and investments growth 18

3.1.3. Wealth invested directly in the equity and bond markets has risen, but deposits will have an enduring allure 20

3.2. Deposits have been a drag on wealth growth, and this is set to continue 22

3.2.1. Singaporeans tend to favor deposits, with little change forecast 22

3.2.2. GDP growth is forecast to be 1-3% in 2017, broadly similar to 2016 22

3.3. After a brief splurge, bond holdings will grow more slowly in the future 23

3.4. With the STI finally trading comfortably above 3,000 in 2017, investors will be drawn back to equity 25

3.4.1. Retail equity holdings track the performance of the stock market 26

3.4.2. Mutual funds will only slowly regain their share of retail investors' portfolios, as inflows went into reverse in 2016 28

4. HNW INVESTMENT PREFERENCES 30

4.1. Illiquid investments make up a significant percentage of onshore assets 30

4.1.1. Private equity and hedge funds are the most popular non-traditional investments 30

4.1.2. Property holds a long-term attraction for HNW individuals, but local conditions have dampened its current role 31

4.1.3. Offering commodity investments is a good niche strategy in what remains a regional trading hub 31

4.2. Offshore investments drain almost half of Singaporean HNW wealth from local institutions 32

4.2.1. Onshore banks need to offer offshore services to capture a greater share of HNW portfolios 32

4.2.2. The large expat community drives the offshore market for Singaporean wealth 34

4.2.3. Global links will help wealth managers capture much of the wealth booked offshore 34

4.2.4. Singapore has been more open to DTCs than TIEAs, but this is changing 36

4.2.5. Tax rates are low and stable in Singapore, making it an attractive destination for foreign and local wealth 37

5. APPENDIX 40

5.1. Abbreviations and acronyms 40

5.2. Supplementary data 41

5.3. Definitions 45

5.3.1. Affluent 45

5.3.2. CRS 45

5.3.3. Domicile 45

5.3.4. DTC 45

5.3.5. Exchange of information 45

5.3.6. FATCA 46

5.3.7. HNW 46

5.3.8. Liquid assets 47

5.3.9. Mass affluent 47

5.3.10. Onshore 47

5.3.11. Residency 48

5.3.12. TIEAs 48

5.4. Methodology 48

5.4.1. 2016 Global Wealth Managers Survey 48

5.4.2. 2015 Global Wealth Managers Survey 49

5.4.3. Global Wealth Model methodology 49

5.4.4. Global Retail Investments Analytics methodology 50

5.5. Bibliography 51

5.6. Further reading 51

List of Tables

Table 1: Average monthly income from work per employed household member by deciles, as percentage of total market average , 2000-16 14

Table 2: Personal income tax rates and charges, 2017 38

Table 3: Singapore: adult population segmented by affluent category and asset band (000s), 2010−15 41

Table 4: Singapore: adult population segmented by affluent category and asset band (000s), 2016e−20f 42

Table 5: Singapore: retail wealth segmented by affluent category and asset band (000s), 2010−15 43

Table 6: Singapore: retail wealth segmented by affluent category and asset band (000s), 2016e−20f 44

List of Figures

Figure 1: The bulk of the deposit market in Singapore is purely onshore 9

Figure 2: Growth in the onshore wealth market is forecast to be modestly strong 11

Figure 3: Assets will rise robustly early in the forecast 13

Figure 4: A weak property market has seen financial assets rise as a portion of Singaporean wealth 15

Figure 5: Illiquid assets dominate the household balance sheet in Singapore, with CPF center stage 16

Figure 6: Singapore’s retail investment market has rediscovered its pep 18

Figure 7: A limited amount of retail savings are entrusted to the financial markets compared to the West 20

Figure 8: Deposits will continue to dominate the Singapore retail wealth market 21

Figure 9: Deposit growth will remain steady and strong as wage growth revives 23

Figure 10: Despite government efforts, direct retail bond holdings remain low 25

Figure 11: The stock market in Singapore has struggled to add value since 2007 26

Figure 12: With the STI set to rise, equities and mutual fund holdings are sure to follow 27

Figure 13: Investors lost their appetite for equity funds in 2016 28

Figure 14: Alternative funds have gained at the expense of equity funds 29

Figure 15: Hedge funds have come to dominate the alternative scene in Singapore 32

Figure 16: Singaporean investors place offshore funds into a variety of asset classes 33

Figure 17: Singapore’s large expat community strongly influences the offshoring of wealth 34

Figure 18: Western booking centers dominate the offshore market of Singapore 35

Figure 19: Singapore has aggressively pursued DTCs with partners around the world 36

Figure 20: Stamp duty is payable by both sellers and buyers of fixed property in Singapore 39