Despite the US subprime crisis wreaking havoc on the financial world, it appears the rich keep getting richer, according to the latest Merrill Lynch World Wealth Report.

The study tracks investment portfolios and trends of high-net-worth individuals (HNWI).

Setting the entry bar to the world of riches at having $1 million in financial assets, Merrill Lynch identified 10.1 million people last year who met the criterion. It was a 6 percent increase over 2006.

The combined wealth of those identified was a staggering $40.7 trillion - a 9.4 percent jump.

So how did the rich manage to deepen their pockets as gaping holes appear across investment banks' profit books worldwide? The investment bank's managing director, Victor Tan, says the answer lies in portfolio diversification.

And the robust performance in emerging markets, he said, benefited investors.

The rosy economic growth in developing markets is also causing a shift in demographics of the rich population. Rather than being dominated by people from traditional Western countries, the new rich groups are now increasingly from regions such as Asia and the Middle East.

According to the statistics provided by Merrill Lynch, the HNWI population grew by 15.6 percent and 12.2 percent in the Middle East and Latin America, respectively, while Asia saw its number of millionaires jump by 8.7 percent. In Asia alone, 2.8 million people fit within the wealthy category, just behind Europe and North America.

As individual countries, India tops the chart of the HNWI population growth with a significant 22.7 percent surge, while China ranks a close second with a 20.3 percent growth.

Looking ahead, Merrill Lynch expects the economic momentum in emerging markets to continue unabated.

Other than changing demographics of the affluent, cash deposits and fixed-income assets are also becoming more popular among the wealthy.

Merrill Lynch found that the rich last year allocated, on average, 17 and 27 percent of their wealth in cash and fixed income, respectively. It was an increase of 3 and 6 percent.

"We can see that HNWI, under volatile market conditions, channel their investments back into cash deposits," Tan said.

Is the worst over?

Despite Asian stock markets falling across the board in recent months, Merrill Lynch Chief Asia Strategist Mark Matthews has a positive outlook for Hong Kong.

"The stock market will likely rebound in July," Matthew told reporters yesterday.

He said there are signs that mainland inflation has already peaked, which will actually benefit the overall economy.

"Inflation had become malignant," he said. "So slower growth is actually welcomed."

(HK Edition 06/27/2008 page2)