Standard Chartered Bank BeyondBRIC


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Standard Chartered Bank BeyondBRIC

  1. 1. We are in a super-cycle, again
  2. 2. Section 1: Current Situation
  3. 3. The world is growingNominal world GDP since 1990USD billions World GDP (Nominal) 308,285300,000260,000220,000180,000 133,676140,000100,000 62,346 60,000 32,061 22,856 20,000 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 Sources: IMF, Standard Chartered Research 4
  4. 4. The world is growing (2)Nominal world GDP since 1990 World nominal GDP current cycleUSD trn USd trn World nominal GDP World nominal GDP (USD trn)65 70 64.7 61.160 60 57.755 505045 40 32.140 3035 2030 102520 0 1990 1995 2000 2005 2010 2000 2008 2009 2011 Sources: IMF, Standard Chartered Research 5
  5. 5. State, 201070% of global growth this year is coming from EMs(% of world total) US EU 18% 8% Japan 4% CIS RoW 4% 7% Latam 11% MENA 4% Africa 2% Asia 42% Sources: IMF, Standard Chartered Research 6
  6. 6. Asian trade has already recovered past pre-recession peak….Export volumes(indexed to pre-crisis peak, April 2008) World exports Asian exports Advanced economies exports 120 110 Indexed, April 2008 = 100 100 90 80 70 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Jul-10 Sources: IMF, Standard Chartered Research 7
  7. 7. Appreciating currenciesStrong appreciations: Thai baht, Indonesian rupiah, Brazilian real, South African rand THB IDR BRL ZAR 115 105 95 Sep-09 Oct-09 Nov-09 Jan-10 Feb-10 Apr-10 May-10 Jul-10 Aug-10 Sep-10 Sources: Bloomberg, Standard Chartered Research 8
  8. 8. Section 2: The super-cycle
  9. 9. The third super-cycleReal world GDP growth since 1820% Actual world GDP growth Average world GDP growth 10% 1946-1973: 5.0% 8% 6% 1870-1913: 2.7% 2000-2030: 3.6% 4% 1820-1870: 1.7% 2% 0% 1973-1999: 2.8% -2% -4% 1913-1946: 1.7% -6% -8%-10% 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 2020 Sources: Maddison, IMF, Standard Chartered Research 10
  10. 10. The shift in the balance of powerNominal GDP 2010, USD 62trn Nominal GDP 2030, USD 308trn% of global % of global ROW China Japan ROW 6% 10% 3% 5% Japan India 10% 3% China Asia ex CIJ EU-27 23% 6% 14% SSA 2% MENA 3% Latam US EU-27 6% 12% India 27% CIS 10% 3% CIS 5% Asia ex CIJ 8% US Latam SSA 24% 9% MENA 5% 6% Sources: IMF, Standard Chartered Research 11
  11. 11. The New World Order 1990 USD trn 2000 USD trn 2010 USD trn 2020 USD trn 2030 USD trn 1 US 5.8 US 10.0 US 14.6 China 24.6 China 73.5 2 Japan 3.0 Japan 4.7 China 5.9 US 23.3 US 38.2 3 Germany 1.5 Germany 1.9 Japan 5.6 India 9.6 India 30.3 4 France 1.2 UK 1.5 Germany 3.3 Japan 6.0 Brazil 12.2 5 Italy 1.1 France 1.3 France 2.6 Brazil 5.1 Indonesia 9.3 6 UK 1.0 China 1.2 UK 2.3 Germany 5.0 Japan 8.4 7 Canada 0.6 Italy 1.1 Italy 2.0 France 3.9 Germany 8.2 8 Spain 0.5 Canada 0.7 Brazil 2.0 Russia 3.5 Mexico 6.6 9 Brazil 0.5 Brazil 0.6 Canada 1.6 UK 3.4 France 6.4 10 China 0.4 Mexico 0.6 Russia 1.5 Indonesia 3.2 UK 5.6 Source: Standard Chartered Research
  12. 12. The world is more open than ever…Export to GDP ratio% 35 30 25 20 % 15 10 5 0 1820 1870 1913 1929 1950 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2030 Sources: Madisson, IMF WEO, Standard Chartered Research 13
  13. 13. ….and South-South trade likely to continue boomingMajor trade corridors 2009 - 2030 EU-27 United States China MENA India Asia ex CIJ LATAM Sub-Saharan Africa USD trn 6 13 0 2008 2030 Sources: Madisson, IMF WEO, Standard Chartered Research 14
  14. 14. World population is growing…..Population in 2009 and prediction for 2030 Sources: UN, Standard Chartered Research 15
  15. 15. ….and moving to cities…..Urbanisation in 2010 and prediction for 2030 Sources: UN, Standard Chartered Research 16
  16. 16. ….and getting richerReal GDP/capita 2000 – 2030 at market exchange ratesUSD Sources: OECD, Standard Chartered Research 17
  17. 17. Middle class now and in 2030Size of the middle class in 2009 and prediction for 2030 Sources: Mckinsey, World Economic Forum 18
  18. 18. A Chinese luxury wedding Source: OMG 19
  19. 19. Creativity is keyDistribution of tertiary educated population Number of patents filed by countryby 2030 (%) Japan US Europe (incl UK) Latam China South Korea India 9% 16% 600,000 Africa 7% 500,000 China 400,000 13% Developed economies 13% 300,000 United 200,000 States EM Europe 9% + ME 100,000 Japan 10% 5% EM Asia 0 18% 1995 1997 1999 2001 2003 2005 2007 Sources: WDI, WIPO, Standard Chartered Research 20
  20. 20. InnovationInnovation clusters momentum and diversity between 1997 to 2006 Sources: UN, Standard Chartered Research 21
  21. 21. What does the world want?
  22. 22. What does the world want next? Spending habits at different per-capita income levels 35,000 30,000 25,000 Per capita income 20,000 15,000 10,000 5,000 0 TV Motor-cycle Cell phone Car Tourism University Financial education services Source: IAFM (International Academy of Financial Management)
  23. 23. Commodities: Winners and Losers Norway Net oil exporter with sizeable reserves Net oil exporter Relies heavily on coal & oil Russia & CIS imports, despite significant investment in nuclear and Currently largest oil producer. Holds renewable energy Expected to remain net importer of coal and oil 9.2% of global oil reserves and 19% of Canada global coal reserves. Well placed to Holds 14% global coal reserves, but export to both China and Europe imports are preserving future domestic EU-27 supply. Fourth-largest crude oil producer, but imports 55% of oil needs. Holds 7% of global coal Investment in nuclear and renewables reserves but infrastructure United States is curbing future needs, but likely to must improve to reduce remain dependent on fossil fuels dependence on imports. Holds 30% of global coal High dependency on crude reserves. Third-largest oil producer, but dependent on Holds 60% of global oil imports China Japan imports for over 60% of proven oil reserves, MENA equivalent to 78 years of crude oil demand India current production Rest of Asia (ex Japan) Sub-Saharan Africa Vietnam and Indonesia Net oil-exporting region. Brazil is South Africa a large exporter of coal. dominate thermal coal one of the most prospective non- Region expected to remain a net oil export market, although OPEC countries and on the cusp exporter domestic demand growth is LATAM likely to limit Indonesia’s Australia of becoming a significant net crude oil exporter. Region holds exportable surplus 9% of global coal reserves 2% of global coal reserves – Colombia is key exporter ▼Coal ▼Oil ▼Oil ▲Coal ▼Oil ▲Coal ▲Oil ▲Coal ▲Oil Source: Standard Chartered Research
  24. 24. Commodities: Winners and Losers Large metal consumer. Limited domestic mine Will need to import raw production exposes it to high materials to feed strong Russia & CIS prices domestic demand for base metals Kazakhstan produces an excess of copper. Ample reserves China has a structural deficit EU-27 in copper with local reserves being poor quality. Strong Copper deficit demand will make it reliant on imports United States China Japan* MENA India Rest of Asia (ex Japan) Sub-Saharan India is a large consumer of Africa metals due to a rapid expansion Chile and Peru are dominant in manufacturing. Relies heavily producers of copper, and low on imported copper raw Zambia is currently the dominant copper consumption levels allow them LATAM producer, with the DRC another potentially materials to be major winners in a super- important supplier. Timely mine development cycle. While some mines are will be required to allow the region to benefit reaching end of natural life, the from the super-cycle Australia region will continue to be a dominant supplier ▼Copper ▲Copper No effect Source: Standard Chartered Research
  25. 25. Commodities: Winners and Losers Wheat harvests likely to increase, albeit moderately, from Despite persistent weather current production. Exports of shocks can increase acreage Japan continues to wheat will remain strong over and FAO forecasts Russia alone register a sizeable long term, particularly to MENA accounts for 9% of global wheat net trade deficit for Currently top exporter of importers. Region likely to suffer output over next 10 years Imports 30% of all cotton. wheat and coarse wheat and cotton and from higher textile prices as compared with 7% now Structural deficit in cotton will grains. Current will remain an cotton prices rise worsen given that per-capita wheat output covers established and cost- consumption outpaces per- less than 15% of effective exporter of Russia & CIS capita output. Meanwhile, a consumption both commodities drop in per-capita globally, despite some EU-27 consumption of wheat vs. a loss of market share rise in per-capita output will boost exportable surpluses United States Wheat consumption far outstrips output in the China Japan MENA region; deep deficits are likely to remain in place MENA long-term given that region India Rest of Asia (ex-Japan) also has a water deficit Potential to increase wheat Global acreage domination with acreage and output by up to 5mt Sub-Saharan cotton. Cotton output has by 2020. However, output is Africa increased around 10% over the vulnerable to weather shocks last 10 years, compared with the LATAM A large net importer. Current global average of 1%. Significant wheat output covers only 30% of upside potential exists on the current consumption and is likely back of better farming to stagnate at this level over the techniques. Proximity to China forecast period in the absence of will boost overall market share. Australia significant investment in Population growth to pressure agriculture wheat balances into a deficit by 2018 ▼Wheat ▲Wheat ▼Wheat ▲Wheat ▼Wheat ▲Wheat No effect ▼Cotton ▼Cotton ▲Cotton ▲Cotton Source: Standard Chartered Research
  26. 26. Where next to invest?Global equity-market capitalisation, 2009 Global equity-market capitalisation, 2030USD trn, % of USD 45.4trn total USD trn, % of USD 322.1trn total China , 79.8, ROW , 85.7, 25% China , 3.3, 7% India , 1.3, 3% ROW , 8, 18% 26% Asia ex CIJ , 4.5, 10% Japan , 3.5, 8% Japan , 6, 2% India , 27.8, 9% EU-27 , 34.6, 11% EU-27 , 10.1, 23% US , 13.7, 31% Asia ex CIJ , US , 45.7, 14% 42.5, 13% Sources: IMF, Standard Chartered Research Source: Standard Chartered Research
  27. 27. Section 4: Risks
  28. 28. Known unknowns - policy mistakes in the west Financial Markets Symposium Dinner - 21st September 2010 29
  29. 29. Known unknowns – political instability 70 Population (m illion) 60 50 40 30 20 10 0 Yemen Financial Markets Symposium Dinner - 21st September 2010 30
  30. 30. Known unknowns - the environment Physical Water Scarcity Little or No Water Scarcity Economic Water Scarcity Not Estimated Sources: International Water Management Institute 31
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