Allianz has published its “Global Wealth Report”, which puts the asset and debt situation of households in 50 countries under the microscope. File Image :IOL

CAPE TOWN - Allianz has published its the ninth edition of its “Global Wealth Report”, which puts the asset and debt situation of households in more than 50 countries under the microscope. 

2017 was an exceptional year, according to the report. Despite growing political tensions, it was an almost perfect year for investors. 

The economic recovery following the financial crisis culminated in a synchronous upturn around the globe and financial markets performed strongly, particularly equity markets, according to Allianz. 

As a result, the financial assets of households rose significantly by 7.7%. Global gross financial assets increased to €168 trillion.

“Last year was a very good year for savers,” said Michael Heise, chief economist at Allianz. 

“But it was as good as it gets, the post-crisis era is over for good. Gone are the times when an extremely expansive monetary policy provided for a continuous and steady upward trend in financial markets. The signs are already worrying: rising interest rates, trade conflicts, and increasingly populistic politics cause tensions and turbulences. The first month of this year has already given a bitter foretaste.”

South Africa: Financial asset growth almost triple over the previous year

Financial assets of South African households grew by 12.3% in 2017, the fastest increase in four years and almost three times the pace of the year before.

According to the report, at the same time, liabilities increased by 5.1%, broadly in line with last years’ average. 

As a result, the debt ratio of households remained at 45%; in the last ten years, this ratio declined by almost 10 percentage points, witness to improved debt discipline of South African households; however, it stood still considerably above the emerging countries’ average of 37%.

Net financial assets grew by 14.8% in 2017, also tripling the rate of the year before. With net financial asset per capita of R131 030,99, South Africa came in 37th in the list of the richest countries (financial assets per capita, rising one rung over the previous year and swapping places with Bulgaria.

 At the top of the list, Switzerland re-captured the top spot that it lost the year before to the US. In general, European countries performed better in 2017 than in previous years due to a stronger euro.

Investment in securities makes a comeback

There was a noticeable shift in investment behavior in 2017. After savers had largely ignored shares and investment funds in the post-crisis years, 2017 saw significant inflows into this asset class. 

Its share last year reached almost a fifth of fresh funds, even more than in the years preceding the crisis. In the context of booming stock markets, this meant that securities enjoyed by far the strongest growth of all asset classes in 2017, increasing by 12.2% in total and representing over 42% of all savings at the end of 2017. 

This is followed in second place by receivables from insurance companies and pensions, which account for 29% of the asset portfolio and grew by 5.2% last year, Allianz said.

While investors rediscovered the capital markets, bank deposits fell out of favor with households around the globe. Only 42% of new investments went into banks, compared with 63% the year before. 

In absolute figures, this meant a drop of over €390 billion. As a consequence, growth in deposits declined by two percentage points to 4.3% (share of asset portfolio almost 27%). 

“Savers finally recognised the signs of the times,” said Kathrin Brandmeir, co-author of the report. 

“The withdrawal of love for bank deposits, particularly in the ‘old’ industrialized countries, came not a second too early. Because inflation staged a return. Price increases in these countries tripled in 2017 – albeit still on low level. As a result, losses in purchasing power of bank deposits shot up, too: They are estimated to add up to €400 billion in 2017 alone.”

Industrialised nations catch up – the US overtakes China

The years following the crisis were mainly characterised by relatively weak asset growth in industrialised compared to emerging countries, the report said.

This also changed in 2017. The acceleration in growth was due solely to development in industrialized nations: while growth in these countries increased by more than one percentage point to 6.5%, in emerging countries it slackened by three percentage points to 12.9%. 

The growth differential between these two groups of countries was thus at its lowest level since 2005, at 6.5 percentage points. 

The average figure for the past decade was twice as high, at 13 percentage points. 

This contrasting development when it comes to growth in financial assets was largely due to the respective heavyweights, China (where growth slowed from 18.3% to 14%) and the US (where growth accelerated from 5.8% to 8.5%). 

The US has thus overtaken China again in terms of absolute growth. In 2017, the US accounted for around 44% of global growth in gross financial assets of households, while China accounted for only about 25%. This ratio has averaged 26% vs. 35% over the last three years – but with China coming out on top.