Archive for September, 2010

Of locomotives, oil tankers and coal trucks: Why Asia’s appetite for commodities is firing up growth in emerging markets.

September 22, 2020

An article by Michael Power, Investec Asset Management

Michael Power, Strategist, Investec Asset Management will speak at FundForum Middle East 2010

Although the term ‘decoupling’ lost favour as even stock indices in emerging markets tumbled in the wake of the 2008 Credit Crunch, if one looks merely at the macroeconomic performance of the global economy, it is a fair description of what has happened. The world has since divided itself broadly into two economic tracks: the fast one led by the locomotives of China and, to a lesser extent, India versus the slow one headed by the Puffing Billies of the US, Europe and Japan.

In 2009, the rest of the world attached themselves to whichever train most dominated their export profile. Nearly every other country could be classified as one of three types of rolling stock: coal trucks (exporting coal and metals), oil tankers (oil alone) and passenger cars (net resource importers).

It would be neat but incorrect to conclude that the first two resource-rich categories hitched themselves to the growth engines of Asia in 2009 whilst the passenger cars – Mexico and Eastern Europe – had little alternative but to follow their adjacent locomotives. Yes, the coal trucks went with Asia and the passenger cars with Europe and the US but the latter were – in 2009 at least – joined by the oil tankers too as the West’s energy needs were still more oil-intensive whilst the East’s energy needs were still more coal-based. Since then, as China’s oil intensivity has continued to grow apace, the oil tankers have started to ‘jump tracks’ and hitch themselves increasingly to the Asian locomotive, though they have yet to make the transition completely.

Interestingly, there are four countries in the Western Bloc that have ‘jumped train’ too – Australia, Canada, Norway and New Zealand.  Their export profile makes them much more coal trucks or in Norway’s case, an oil tanker, than their Western peers. And this status has served them remarkably well – they have escaped the recent recession with only a few scratches and their currencies are increasingly regarded as safe havens in an otherwise choppy sea.

If the New Normal does grasp most of the big Western markets in its icy grip – though less so Germany, it seems, again because of its export connection to China, in their case of capital goods – then these Western economies are set for a long period of slow growth. By contrast, countries that have resources to export to both the hungry Chinese Dragon and the now dancing Indian Elephant having already shielded themselves from the “global” slowdown. (Note that Western commentators frequently mislabel what has essentially been a Western phenomenon as a “global” one.) And as China’s resource-intensive growth phase still has a good decade to run and India’s equivalent at least three (not to mention their smaller but often still heavily populated Asian neighbours like Indonesia at 235m, Vietnam at 86m, and Bangladesh at 165m), the commodity super-cycle still has very long secular legs. This can only be good for the future prospects of resource-rich nations, be they coal trucks or oil tankers, most of which are in emerging markets.

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Michael will present key insights on evaluating the implications of commodities prices on emerging markets investing and predictions for future growth at FundForum Middle East, 4th October at 9.50am.

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About Michael Power, Strategist, Investec Asset Management

Michael began his career working in the Middle East dept at Chase Manhattan Bank before joining Anglo American’s corporate finance department in South Africa.  Michael then worked in the London corporate finance department of NM Rothschild & Sons/ Smith New Court where his responsibilities had a strong natural resource emphasis.  Having completed a 4X4 overland safari through Africa, Michael worked for HSBC-Equator Bank in Kenya for 4 years.  He returned to England to work at Baring Asset Management as a director in their emerging markets department.  Michael was Head of Africa and the Middle East as well as the natural resources sector, and was also portfolio manager for the Pan African Simba Fund.

Post Under: General

Spotlight Series: Lawrence McDonald lifts the lid on Lehman’s

September 15, 2020

Two years on, and the financial sector is still hurting.  In an interview with the Spotlight Series, Lawrence McDonald explains the motivation to write his book “A collossal failure of common sense” and what can be done to avoid this happening again.

Lawrence McDonald was an integral part of a faction within Lehman Brothers that passionately tried in vain to stop the firm from heading down the road to destruction. Likewise, he also worked closely with Lehman’s credit derivatives team and saw first-hand the design and construction of what Warren Buffett termed as “Wall Street’s financial weapons of mass destruction.”

Post Under: General

Spotlight Series: Suzanne Duncan, IBM Institute for Business Value on the Customer Trust Gap.

September 1, 2020

Suzanne Duncan, Financial Markets Industry Leader, IBM INSTITUTE FOR BUSINESS VALUE presented new research on the “Plugging the Customer Trust Gap” for the NEW FUNDFORUM 2010 KEYNOTE RESEARCH PAPER OF THE YEAR.

In an interview for the Spotlight Series, she explains the key findings of the report and recommends advice over product as a key differentiator.



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