Biggest risks and opportunities for wealth creation around the world

By / May 20, 2015 | 8:06 am

The Wealth Report 2015 by Knight Frank compiled the risks and opportunities for wealth creation around the world, as observed by different economists across the globe.

OPPORTUNITIES

Property and investment for passion– After a period such as the financial crisis, with the great correction that happened in its wake, there are always opportunities to find assets that might still be undervalued, whether property in the US or Spain. Even seven years after the crisis, there are still opportunities available. If you can only get a low rate of return, you might as well invest in something you enjoy.

Finding the ‘missing middle’ of manufacturing– Dr. Shubhada Rao, Senior President and Chief Economist at Yes Bank, one of India’s largest private- sector banks says that the opportunities for wealth creation, especially in India, are potentially huge, if policymakers can boost manufacturing, India has the ability and the know-how to increase its global presence in terms of manufacturing, and it could benefit from the global links created by overseas investment. If allowed to flourish, a manufacturing sector in India could provide massive growth. Education is also more widespread than in other emerging economies.

Technology– Advances in technology should continue to empower the spread of education and prosperity, and in turn fuel consumer demand. Only a major conflict is likely to stand in the way of this.

Africa’s young population– Africa is one of the few regions remaining in the world where there is huge potential for growth. It has a growing young population that is fuelling demand and pushing up economic activity and wealth creation. The continent is also proud for the entrepreneurialism, which has resulted in a clear shift towards substantial growth in high net worth individuals (HNWI) numbers over recent years. The continent currently holding 15% of the world’s population, but delivers only 4% of global output, it offers great opportunity over the medium and longer term.

Technology and real estate-There will be growing opportunities in emerging market technology, that is, new, more-sophisticated developments within the technology we all use every day. People should not overlook the opportunities in developed economies. For many years the story has been about emerging economies, based on their manufacturing. Some manufacturing have moved back to the US and Canada in recent years, due to available opportunities.

RISKS

Narrow economic growth- If economic growth over the coming years is not spread across every sector of the economy the risk for wealth creation in many emerging economies will arise. This wide ranged growth results in a quicker trickle-down effect than when the economy relies on just a few strong pockets of output.

Prices of equities– The biggest risk at present is the disconnection between the pricing of bonds and commodities and equities. While bond and commodity prices are pricing in weak global demand, recent stock market seems to be factoring in the expectation of future profits based on rising demand.

Volatile outlook– If economic growth is stronger than anticipated and central banks are wrong-footed by wage pressures on inflation, this could lead to tightening of policy and strong rises in yields. Investment advisors worry more about these issues today, as loose monetary policies have helped push the valuation of many asset markets to levels that allow little room for disappointment.

Sustained political upheaval– Instability is a risk to any form of economic growth. Especially in Africa, a major sustained political upheaval could detract from the important projects being implemented that should deliver growth. Many countries within Africa, all at different stages of development should stay on track towards economic development and growth. But if any of them, especially the major nations such as Nigeria, Kenya, South Africa or Angola, took a sudden change of direction, then that would pose a risk to Africa’s growth story.