Transcript Nordea Investment Management Investeringsseminar torsdag

NBAS Luncheon meeting – 21
February 2008.
 Future trends shaping Asia.
 By Prof. Jørgen Ørstrøm møller
I. The global economy February
2008. (2/3) Fasten Safetybelt!
I. The global economy February
2008. (3/3) Fasten Safetybelt!
 US probably in recession, also Japan.
 Global recession? Depend on
economic development in Asia excl
Japan.
 Supply chain.
 Importance of export to the US.
 Domestic demand, consumption
II. Supply Chain.
 From 1996 to 2003 China´s share of US
import rose from 8,5% to 22,4%. Other
Asian countries share fell to 1/3. Points to
an asian supply chain geared to export
from Asia via China, but now
 When Chinas GDP ↑ with 1%, import of
consumption goods from the following
countries ↑ with:
 Japan 1,04%, Singapore 1,06, Malaysia
1,29%, Korea 1,30%, Indonesia
1,46%,India 1,54%
 Points to swing from Us controlled to Asia
controlled economy.
III. Export to US.
 Goldman Sachs about netexport as driver for
China. 2,7pp in 2005, 2,2pp in 2006, 1,6pp
in 2007
 Goldman Sachs. Zerogrowth in US and 8%
growth in China anyway.
 China´s export to US (% of total export) was
in 2000 31%, primo 2007 23%.
 Deutsche Bank reckons that reduction of
US growth with 1 percent point reduces
China's export growth with 4 percent points
and Chinas GDP with 0.5 percent points.
IV. Driver– export or domestic
demand.
V. Preliminary conclusion.
 Asia and in particular China less
dependent on US than before. Looks
like high growth is achievable even if
US goes into recession albeit of
course at a lower rate.
 How strong is Asia?
VI. Strengths. (1/7).
Economic integration,
savings/swf, multinationals, China/India-Chindia, private
consumption.
Intraregional trade (%) 1980 og 2005:
 ASEAN
15,9
25,7
 ASEAN + Kina, Japan,
Korea
29
39
 Same + Hong Kong +
Taiwan
38,7
55,1
PM. EU (25) 57,3 64,6. NAFTA 33,2 42,1.
 Free trade agreemnts. China-ASEAN, India-ASEAN,
China-India. Japan and Korea also in the picture.
 A large market with 3 bn inhabitants and freedom of
localization, comparative advantages can be exploited.
The world has never seen anything like that.
VI. Strengths. (2/7).
Economic integration,
savings/swf, multinationals, China/India-Chindia, private
consumption
 China sits on $US 1400 bn of which 400 is
treasury bonds. Continue?
 New investment pattern, Blackstone,
Chinalco versus BHP-Rio Tinto.
 New trend instiutional investors. Think
about it, who is going to decide? Those in
position of the money.
 Merril Lynch, UBS, Morgan Stanley,
Citigroup. What does it mean?
 SWF soon $US 3 bn rising towards 12 bn in
2015.
VI. Strengths. (3/7).
Economic integration,
savings/swf, multinationals, China/India-Chindia, private
consumption
VI. Strengths. (4/7).
Economic integration,
savings/swf, multinationals, China/India-Chindia, private
consumption
 Japanese multinationals? Not really.
 Lenovo-IBM, CNOOC, Petrochina.
Knowledge, management more than
market share. ICBC 20% of Standard Bank
(SA) operating in 18 African countries.
 M&As or minority shareholder.
 Indian companies. Mittal Steel, Tata.
 Chinese and Indian comoanies enter each
other´s markets.
VI. Strengths. (5/7).
Economic integration,
savings/swf, multinationals, China/India-Chindia, private
consumption
 Figures from 2006.
 China FDI in $US 69 bn. Out $US 16 bn.
 India FDI in $US 12 bn. Out $US 15 bn.
Fortune Oct 29, 2007
India. 2004. For. buy ind. Comp. $US 2,9 bn – ind buy for 1,5
2005.
8,0
4,5
2006.
10,1
21,7
2007 – 3 first Q´s.
28,1
18,1
VI. Strengths. (6/7).
Economic integration,
savings/swf, multinationals, China/India-Chindia, private
consumption

Comparative advantage. China labour productivity. India
capital productivity. New driver for global economy.
2004.
China. India.(mastercard)
Labour productivity. GDP pr unit. UsD 2140
1380.
Capital productivity
10-12%. 15-17%
 Trade 2007 approx. $US 20 bn. 15 years ago $US 150.
 April 2005 Primeminister Wen Jiabao in India.
 November 2006 Kongresparty chairman Sonia Gandhi in
China.
 November 2006 President Hu Jintao in India.
 December 2007 joint military exercise.
 January 2008 Primeminister Manmohan Singh in China.
"necessary for both India and China to consult each
other more frequently“.
 They do not threaten each other´s vital interest.
VI. Strengths. (7/7).
Economic integration,
savings/swf, multinationals, China/India-Chindia, private
consumption
 Asia. High savingsrate yes but strong
growth and rising share of population with
householdincome > 5.000 UsD stimualtes
consumption.
 Qualitative consumption in asian hubs.
Luxury, branding, trendsetters.
 Massconsumption in Asia, China og India.
 Now 17,4% af urban households in China
indcome  $US 5.000. In 2014  90% y/y
increase24%.
 Restructuring of retailtrade in China and
India.
VII. Asia´s problems.
 The 1980 model runs out of steam
 Demography in Asia.
 Less propitious international
environment.
 We move from the age of abundance
to the age of scarcity.
VIII. Conclusion.
 Economic powershift from the West to Asia.
 Political adjustment lags behind as established powers
cling to influence. Germany one hundred years ago. UK
and USA. Transfer of power rarely takes place without
conflict.
 Can Asia as rising ´superpower´ and the US with Europe
in the sidecar manage such a transfer of power and
create a steering system to replace the one shaped
1945-1950?
 If yes, splendid. If no then what about globalization.
 Jørgen Ørstrøm Møller