Мое выступление на бизнес-завтраке Московской ассоциации CFA. Тема - смена парадигмы устройства мира. До сих пор мир делился на G7 и развивающиеся страны. Экономисты спорят о природе экономического роста развивающихся стран. На мой взгляд - этот рост явился следствием уникального стечения обстоятельств, закончившихся финансовым кризисом 2008 года. В дальнейшем картина мира может выглядет принципиально по-другому. Например, двумя основными полюсами будут не развитые и развивающиеся рынки, а фискально ответственные и безответственные страны. Такого головокружительного роста благосостояния, возможно, мы уже не увидим никогда.

1. ECONOMIC EXPOSURE
TO EMERGING MARKETS
PARADIGM SHIFT
MOSCOW 2012

2. A paradigm shi,
is a radical change in personal beliefs, complex
systems or organizaMons, replacing the former
way of thinking or organizing with a radically
different way of thinking or organizing.
Think of a Paradigm ShiR as a change from
one way of thinking to another.
Thomas Kuhn
2

3. WHAT ARE EMERGING MARKETS?
In the 1970s the common term was
• "less economically developed countries" (LEDCs)
The term was coined in the early 1980s by Antoine van Agtmael,
• then working for the World Bank’s IFC.
Emerging markets associated to:
• the Asian Mger economies,
• BRIC (Brazil, Russia, India and China) coined by GS,
• “fronMer” markets (it is not clear if they yet deserve to be called emerging).
PoliMcal scienMst Ian Bremmer:
• "a country where poliMcs mabers at least as much as economics to the
markets”.
3

4. NEXT ELEVEN
New terms have emerged:
• BRIC ‐ Brazil, Russia, India, and China,
• BRICET (BRIC + Eastern Europe and Turkey),
• BRICS (BRIC + South Africa),
• BRICM (BRIC + Mexico),
• BRICK (BRIC + South Korea),
• Next Eleven (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan,
Philippines, South Korea, Turkey, and Vietnam)
• CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa),
• NIC (Newly Industrialized Countries),
4

5. WHO OWN “EMERGING MARKETS”???
The best guides tend to be investment informaMon sources like
• ISI Emerging Markets,
• the Economist,
• market index makers (Morgan Stanley Capital InternaMonal),
• raMngs agencies (S&P).
5

6. WHERE MONEY FLOW???
90% of EM managers use MSCI indexes:
– South Korea and Taiwan – 30%,
– Asia – 52%,
– LaMn America – 20%,
– the BRICs – 37.5%.
6

7. EM IS WHERE YOUR MONEY HAVE TO BE…
7

8. WHERE IS THE BEEF?!
EM grew by 270% through last decade.
Short run fluctuaMons are caused by:
• P/E fluctuaMons.
Whereas…
Equity market long‐term return is
explained by:
1. Earning growth,
2. Dividends
ECONOMY GROWTH
MATTERS!!!
8

9. WHAT MAKES THEM GROW?
What economists agree with is
• such countries are considered to be in a transiMonal phase between
developing and developed status.
While researchers, including several professors from Harvard Business School and
Yale School of Management, have described acMvity in countries such as India and
China…
…it is s/ll li1le understood how a market emerges?
9

10. HARROD–DOMAR MODEL
10

11. THE SOLOW MODEL
11

12. THE RAMSEY GROWTH MODEL
12

13. AK MODEL
13

14. GROWTH DRIVERS – NO CONSENSUS
CAPITAL
ACCUMULATION
HUMAN R&D and
CAPITAL INNOVATION
14

15.
They wanted…
They just were allowed…
15

16. ECONOMIC GROWTH ‐ CHINA
16

17. US BABY‐BOOMERS
17

18. WHO’S A CULPRIT???
18

19. HOUSEHOLD FORMATION
19

20. FALLING INFLATION
20

21. BOOMING CONSUMPTION
21

22. BANK LOAN BOOMING
22

23. SOLIDARITY SYSTEM EXPANSION
23

24. HOUSEHOLD DEBT OUTSTANDING
24

25. US NATIONAL DEBT
25

26. PERSONAL SAVINGS AS %% OF DISPOSABLE INCOME
26

27. HIGHER SPENDING LEAKS ABROAD
27

28. PRESS YOUR LUCK
28

29. SHARE OF GLOBAL MANUFACTURING OUTPUT
29

30. MOVE PRODUCTION OUT TO LOW COST NATIONS
30

31. RMB REAL EFFECTIVE EXCHANGE RATE INDEX
31

32. VICIOUS CYCLE
US
consumers
China
US banks
producers
US
PBC
Government
32

33. FOREIGN EXCHANGE RESERVES
33

34. US TOTAL DEBT STRUCTURE
34

35. CHINESE FOREIGN ASSETS
35

36. INNOVATIVE BANKING
36

37. REAL ESTATE BUBBLE
37

38. US GDP VS. PERSONAL INCOME
38

39. US GDP ADJUSTED FOR DEBT
39

40. GLOBAL IMBALANCES (% OF WORLD GDP)
CHN+EMA: China, Hong Kong SAR, Indonesia, Korea, Malaysia, Philippines, Singapore,
Taiwan Province of China, and Thailand; US: United States;DEU+JPN: Germany and
Japan; OCADC: Bulgaria, CroaMa, Czech Republic, Estonia, Greece, Hungary, Ireland,
Latvia, Lithuania, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Turkey,
and United Kingdom; OIL: Oil exporters; ROW: rest of the world.
40

41. BUBBLE BURST
41

42. FINANCIAL CONTAGION
42

43. NET WEALTH REDUCTION
43

44. FEDERAL RESERVE’S PREGNANT BALANCE SHEET
44

45. ECB AND BOE
45

46. MONEY FLEE FROM ECONOMY
46

47. DELEVERAGING??? REALLY!?
47

48. PARADIGM SHIFTS
48

49. PROCESS WILL EXPAND
49

50. BABY‐BOOMERS RETIRE
50

51. TOTAL DEBD AS %% OF GDP
51

52. SOMEONE HAVE TO SPEND
52

53. 2 By 2025, the consuming class will swell to 4.2 billion people.
EM WILL??? in emerging markets will account for $30 trillion—
Consumption
nearly half of the global total.
World population, billions World consumption, $ trillion
64
Emerging
30
markets
7.9 38
6.8
Consuming 12
5.2 2.4 4.2
class1
3.7 1.2
Developed
2.5 0.9 34
Below 26 markets
0.3 4.0 4.4 3.7 consuming
2.2 2.8
class1
1950 1970 1990 2010 20252 2010 20253
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53

54. WAGE IS GROWING IN EM
54

55. LABOR COST ADVANTAGE SHRINKS
55

56. TO SPEND CONSUMERS NEED INCOME
56

57. AND NOT ONLY CHINA
57

58. SHALL THIS REVERT???
58

59. FIXED ASSETS INVESTMENT
59

60. WHAT ABOUT COMPETITION???
60

61. HUMAN CAPITAL
61

62. WHAT ABOUT EXPECTED RETURN???
62

63. HF MANAGER JONATHAN BINDER:
“investors will not necessarily think of "G10" (or G7) versus "emerging markets”.
“Instead, people should look at the countries that
• are fiscally responsible versus
• countries that are not.”
63

64. ONE POTENTIAL SCENARIO – RENTIER NATION
64

65. THANK YOU FOR YOUR
ATTENTION!!!
Oleg Shenker, CFA
Red Value Capital Partners
Managing Partner
+7(985) 231 0342
65