Asia Economic Outlook from CLSA Conference
Frank Holmes, CEO of US Global Investors, shares a few interesting notes from his trip to the latest CLSA investment conference in Singapore.
The conference in Singapore also featured presentations by CLSA strategists and economists looking at the broader economic outlook for 2009 and 2010. Here are some of the interesting points made in those presentations:
* The total U.S. debt (public and private) was 370 percent of GDP at the end of the fourth quarter of 2008. That’s up roughly 50 percent in the past decade and, of course, this does not take into account the $1 trillion-plus in economic stimulus under President Obama.
* Nominal personal consumption growth in the U.S. is negative and at its lowest in nearly 50 years on a year-over-year basis. This is part of the deflationary trend under way, along with the deleveraging in the financial sector over the past five quarters.
* While emerging Asia (ex-Japan) remains heavily reliant on exports, it is consuming an increasing amount of its own production. In 2001, private consumption in emerging Asia was 25 percent of the U.S. level. In 2008, it was 38 percent. In CLSA’s view, when this consumption level hits 50 percent, you will begin to see an economic decoupling between emerging Asia and the West.
* CLSA’s respected Asia strategist Chris Wood came out with country weightings for the Asia Pacific region compared to the MSCI Asia ex-Japan index. He recommended that investors overweight India, China, Hong Kong and Taiwan and that they strongly underweight Australia (12 percent vs. 26 percent in the MSCI index) due to housing and financial issues.
* CLSA forecasts that China’s economy will grow 7 percent this year and 8 percent next year (9 percent in 2008), and that India will grow 4.6 percent this year and 6.4 percent in 2010 (6.3 percent in 2008). Major shrinkage is predicted elsewhere in the region in 2009: Taiwan -10.8 percent, Singapore -10 percent, Thailand -9 percent, Hong Kong -6.8 percent, South Korea -6.8 percent and Japan -5.5 percent.
* The key macro driver for India is the collapse of oil prices from last year’s highs. This functions like a huge tax break and, along with monetary easing by the Delhi government and underleveraged consumers, bodes well going forward.
via Seeking Alpha.
