Asianomics #4/2010: Japan - In A Corner  28 May 2010 Japan is the forgotten country in Asia. When the global economy went into a tailspin in 2008 it was to China, Asia’s second biggest economy, that markets turned for a lead out of recession. No-one posed the questions, where is Japan? How can it help? For good reason. In our Asianomics report, Japan – In a corner, we attempt to identify the investment implications for a society going through the menopause.   This report has been commissioned by Asianomics Limited for distribution to members. Asianomics #3/2010: AfricAsia - Continental Shift 14 May 2010 In the Asianomics No. 3/2010, AfricAsia – Continental Shift, Yuwa Hedrick-Wong, MasterCard International’s Asia-Pacific economic consultant, takes a look at the emerging relationship between Asia’s ‘Big Two’ and Africa’s ‘Big Seven’. He argues that this is a developing relationship that could change the face of the global economy. Africa can provide India and China with the raw materials and commodities that they desperately need to fuel their growth while African markets are ready outlets for cheap Chinese and Indian exports. It is a case of mutually beneficial trade and investment prospects.   This report has been commissioned by Asianomics Limited for distribution to members. Asianomics #2/2010: The Arab Agony 29 March 2010 In this Asianomics No. 2/2010, The Arab Agony, we depart from our Asia-centric view of the world and take a look at the state of affairs in the Middle East, in particular in the Arab heartlands. Jim Sillars, a long time friend and ex-Member of Parliament in the UK, worked through the 1990s as the assistant secretary-general of the Arab-British Chamber of Commerce. He has had a long running association with many companies and organisations in the Middle East. Jim writes this report as a long-time Middle East watcher and as someone who s sympathetic, although not without reservations, to the Arab plight. He starts off with the question, “Why do they hate us?” His answers will be uncomfortable to many readers (not least to me) but his assessment of the problems in the Middle East is compelling and brutal in its honesty. .    This report has been commissioned by Asianomics Limited for distribution to members. Asianomics #1/2010: Philippines - Gloria's Gamble 23 March 2010 John Berthelsen, a long-time Philippines watcher, outlines the dangers of an untested electronic voting system and just who might be waiting (hoping) in the wings for an inconclusive election outcome. In this special report, Asianomics No. 1/2010, Philippines - Gloria's Gamble, John outlines the key candidates, the ambitions of the current president and the hopes that are being pinned on untested equipment. Intrigues and surprises are the hallmarks of Philippines politics - 2010 is shaping up to be yet another doozey.    This report has been commissioned by Asianomics Limited for distribution to members. Asianomics #8/2009: Green Planet - State of the world 3 December 2009 In our 2009 end-year Asianomics report, Green Planet - The state of the world, we outline the fragile growth dynamics that are haunting central banks and governments as they try to convince markets and companies that the worst is over. We look at whether the world faces inflation or deflation and conclude that it faces both, depending on where you live.    This report has been commissioned by Asianomics Limited for distribution to members. Asianomics #7/2009: China's Press - True to type 30 October 2009 When we established Asianomics Limited in late 2007 we promised ourselves that a feature of the company would be to write about topics and countries that no-one else was interested in - either because they seemed unimportant to the market at that moment or because they were politically too hard for stockbrokers or the media. Earlier this year we published an economic/political commentary on Cambodia (Asianomics No 1, Cambodia - The wild east) and now we address the issue of the media in China. Our guest writer on this topic is Michael Charnock. Michael's report, China's Press - True to type (Asianomics No. 7/2009), is hard-hitting, direct and honest. We are sure that you will find it a fascinating read and an extraordinary insight into what is quickly becoming the fastest growing printed media industry in the world - albeit a government directed one (kind of like China's listed banks....). Asianomics #6/2009: India - Embracing the Elephant 14 September 2009 During our trip to Mumbai, Delhi and Kolkata in late August the biggest worry for the next twelve months was the effect of a deficient monsoon on rural incomes and, therefore, domestic demand. The good news is that, in the weeks since our visit, the degree of deficiency for this year’s summer monsoon has dropped from 24% to 20% (at its peak it was running at 29%). The rains during August and September promise to make the Rabi (winter) crop a relatively good one and therefore will help alleviate the damage from the badly affected summer (Kharif) crop. India’s GDP should be reduced by no more than 0.5-1% over the next year. Good news. But the market’s and analysts’ concern for such short term growth hindrances does India a disservice. As we try to show in Asianomics No. 6/2009, India – Embracing the Elephant, it is long term trends that should make the Indian equity market a structural overweight in any portfolio that purports to capture Asian growth potential.    This report has been commissioned by Asianomics Limited for distribution to members. Asianomics #5/2009: Shipping - Bleak Times 28 July 2009 We had asked our old friend (and fellow long-suffering racehorse owner) Tony Foster, MD of Marine Capital in London, to put together Asianomics No 5/2009, Shipping - Bleak Times, a follow-up report to his shipping brief from February last year. At that time the shipping industry was in raptures about prospects for global trade, decoupling and ever bigger returns. Today, it is in the worst doldrums in the shipping sector's history. The decoupling didn't happen (equity market performance is not real decoupling), global trade volumes have crashed and there are just too many newbuilds reaching the market this year, next year and 2011.   This report has been commissioned by Asianomics Limited for distribution to members. Asianomics #4/2009: India Votes - The Stage Is Set 28 April 2009 We asked our ex-CLSA colleague Anupam Gupta, of Mumbai-based Aavan Investment Research, to look at the key states, principal figures and policy differences in the Indian election. His findings are contained in the attached report - Asianomics No 4/2009,  India Votes - The Stage is Set. In his view the likely outcome of the election is for more of what we have had for the last four years - a weak coalition government at the centre beholden to a few left-leaning regional parties. In our view, that will be a negative for India as we enter a crucial period in global economic growth.      This report has been commissioned by Asianomics Limited for distribution to members. Asianomics #3/2009: Debt - The Great Excess 28 April 2009 In Asianomics No 3/2009, Debt – The Great Excess, we examine what is wrong with the Keynesian Consensus solution, how debt dynamics will work to ensure that either governments stop their profligacy soon or debt levels will become explosive and why the global economy needs deflation now more than ever before.        This report has been commissioned by Asianomics Limited for distribution to members. Asianomics #2/2009: GDP - Damaged goods 17 March 2009 The overwhelming consensus in economic and bureaucratic circles is that governments and central banks must do everything in their power to arrest the decline in economic activity and to unfreeze the banking system. That is what stimulus programmes, zero interest rate monetary policies and quantitative easing are all about. But will they actually help? Asianomics No. 2/2009, GDP – Damaged goods is a departure from our normal work. We have asked Heinz Blasnik, an Austrian economist who actually hails from Austria, to explain the Austrian School views on the current crisis and policy responses in detail.        This report has been commissioned by Asianomics Limited for distribution to members. Asianomics #1/2009: Cambodia - The Wild East 19 February 2009 It is not often the case that Cambodia makes the international news headlines and when it does it tends to be for the wrong reasons. Last week it was the beginning of war crimes trials that reminded us of its existence and the troubled recent history of the country. A little further digging would have found recent stories about the meteoric rise of Prime Minister Hun Sen’s son, Hun Manet, to the rank of Brigadier General in the military police. Dynasties and nepotism die hard in south-east Asia. We take the opportunity of this flurry of publicity to start the week with Asianomics No. 1/2009, Cambodia – The Wild East.       This report has been commissioned by Asianomics Limited for distribution to members. Available to members only. 25 May 2010 ExposAsia No 17/2010:  Copper's Second Coming Simon Hunt, founder of Simon Hunt Strategic Services, has over five decades experience in the mining and metals industries. In recent years he has brought that experience to bear in a forecasting service for metals industry participants, particularly in the copper sphere. Simon has written two copper reports for us over the last two years and in ExposAsia No 17, Copper's Second Coming, he brings the story up-to-date. He blends economic commentary with insights from metals industry contacts and technical pricing analysis to arrive at his forecasts of copper demand and copper prices.  5 May 2010 ExposAsia No 16/2010:  The Rush for Rare Metals In ExposAsia No 16, The Rush for Rare Metals, Philip Bowring takes a look at the rush to cash in on the China boom. In the frenzy over Chinese growth there will be good deals and bad deals available to supply the world's fastest growing economy (for now). We leave you to judge whether or not the latest proposed Russian listing on the Hong Kong stock exchange represents good value or not (the first from this stable has done nothing since it was listed in January). 4 May 2010 ExposAsia No 15/2010:  Chinese Outbound Investment Booms In 2009 net foreign direct investment into China was reported at US$34.3bn according to official balance of payments data. This was down from US$94.3bn in 2008 and from a peak of US$121.4bn in 2007. While inward investment flows halved last year and were the main contributor to the decline in the balance, outward bound investment from China ie, that officially recorded, held up reasonably well, falling by just under US$10bn in the year (to $43.9 bn). But, as John Berthelsen of Asia Sentinel suggests in ExposAsia No. 15, Chinese Outbound Investment Booms, perhaps the official outbound data do not paint the whole picture. 22 April 2010 ExposAsia No 14/2010:  The Great Deception In ExposAsia No 14, The Great Deception, we look at the US GDP numbers and find them wanting. There are too many statistical shenanigans behind a figure that no-one can either confirm or deny (since GDP is not, in itself, observable). From most other indicators the US economy is simply back at levels of activity that were in place between 2005 and 2007. The US housing market, on the other hand, remains in its deepest slump for over 40 years with no sign whatsoever of recovery. The declaration of victory over the recession is, in our view, premature. We recommend safety over heroics in the coming months. 15 April 2010 ExposAsia No 13/2010:  The Noynoy Pulls Away With less than a month to go to polling the Philippines presidential election looks to be turning decisively in favour of Noynoy Aquino. This appears to be a reaction against Manny Villar rather than a positive view of the ex-President's son. Exposasia No. 13/2010, Nonoy Pulls Away, is an update to John's Asianomics report (Philippines - Gloria's gamble, 23 March 2010). In this update, John Berthelsen recounts how Villar's campaign appears to be losing steam while election violence mounts. Politics in south-east Asia is rarely dull. 8 April 2010 ExposAsia No 12/2010:  The Great Australian Bubble In ExposAsia No 12/2010, The Great Australian Bubble, our Australia observer, Justin Pyvis of Ausnomics, takes a look at the housing market down under. Much effort was expended during the 2008 financial crisis to keep the housing market from imploding. The result is that Australian household indebtedness has continued to grow and affordability has been pushed to new lows.   26 March 2010 ExposAsia No 11/2010:  Indonesia's Sweet Decades Philip Bowring, long-time Asia watcher, looks at the demographic dividend unfolding in Indonesia. The country compares favourably with a lot of its Asian neighbours but shows no signs of being swamped by a disaffected youth as in many predominantly Muslim countries. Some good news for once - read ExposAsia No. 11/2010, Indonesia's Sweet Decades. 17 March 2010 ExposAsia No 10/2010:  Tu Ne Cede Malis... When the histories of the early 21st Century Great Recession come to be written over the next 50 years there will be a reckoning involved that none of us can properly envisage at the moment. In our view it will include the demise of central banking as we know it. That is not a prospect to be feared, as we try to show in ExposAsia No 10, Tu Ne Cede Malis…, but to be embraced and anticipated with relish. As investors we will then be able to revert to employing our capital profitably and productively, rather than speculatively. As individuals we will hopefully once again be to enjoy our wealth, free from the inflationary confiscation that characterises central banking and government as we know them today. 1 March 2010 ExposAsia No 9/2010:  Baby Don't Go  In ExposAsia No 9/2010, Baby Don't Go, our Asia Sentinel Correspondent (there will be occasional anonymous pieces in order to protect writers in some countries which are sensitive to specific analyses or comments) looks at the ageing population in China. This is not an issue for the long future, it is happening now. But just how severe is the problem and what will it mean for future economic growth? 23 February 2010 ExposAsia No 8/2010:  Money, Money, Money  In ExposAsia No 8, Money, Money, Money we look at the sources of inflation - money and credit - and show how they are already manifest in China; in the form of fixed investment growth and rapid asset price appreciation. The sectors of the economy that have been heavily supported by last year's government stimulus and directed lending are now taking on a life of their own and attracting labour, materials and capital. China needs to act quickly before it is drawn into a US-style housing bubble with the inevitable bad debt and recession consequences that results.   19 February 2010 ExposAsia No 7/2010:  Fool's Paradise In ExposAsia No 7, Fool's Paradise, Justin Pyvis of Ausnomics examines the credit conditions in Australia and the response of the banks to the global credit crunch. He finds that through government stimulus measures and central bank support the banking system has fuelled yet another leg of the Australian housing bubble. In turn, the avoidance of technical recession in Australia has come about because of low quality, unproductive sector growth related to housing and construction.   18 February 2010 ExposAsia No 6/2010:  Opposition Coalition In Crisis  John Berthelsen the editor of The Asia Sentinel, an on-line publication of news, comment and analysis covering 23 countries across Asia, writes about the crumbling opposition to Barisan Nasional in ExposAsia No 6, Opposition Coalition In Crisis. 12 February 2010 ExposAsia No 5/2010:  A Politics Go Sour in Indonesia  ExposAsia No. 5/2010, Politics go sour in Indonesia, is a commentary written by John Berthelsen, editor of The Asia Sentinel, an on-line publication of news, comment and analysis covering 23 countries across Asia.  John comments on a growing squabble at the heart of Indonesian politics. Indonesia has been a magnet for foreign equity investment over the last year or so (less so direct investment because of the regulatory and judicial regimes). It has also enjoyed a premium rating because of the perceived stability of politics in the country and the high regard with which investors hold President Yudhoyono (or maybe it is just because it is resource-rich). We must admit to being more sceptical about SBY as we are still actually waiting for him to do something.  11 February 2010 ExposAsia No 4/2010:  A Ramshackle Affair  ExposAsia No 4, A Ramshackle Affair, argues that we should expect very little from the budget in the way of progress on India's cumbersome tax and spending system. This means that there will be little progress on the budget deficit either which will result in higher than would otherwise be necessary interest rates in India in the next few years. 28 January 2010 ExposAsia No 3/2010:  Small is Suffering  In ExposAsia, Small is Suffering, we take a look at the National Federation of Independent Business' Small Business Index. It makes for grim reading. 21 January 2010 ExposAsia No 2/2010:  Cred Flags In Asia, the two countries where red flags are raised on the credit cycle are China and Australia. Our measure is at or above the two standard deviation mark in terms of credit growth relative to GDP - in all countries in the past this has been the precursor to a slump or banking sector crisis. Full details are contained in ExposAsia No 2/2010, Cred Flags.   13 January 2010 ExposAsia No 1/2010:  Thailand in Flux Following our country visit to Thailand last week, and the two Insight notes that were sent out at that time, our newly published ExposAsia No 1/2010, Thailand in Flux, examines in more detail the economic backdrop to the Thai market as it enters 2010. We find that monetary conditions have been supportive of only modest growth going forward and that concerns over inflation are not justified. We expect interest rates to remain on hold throughout the year. 15 December 2009 ExposAsia No 8/2009:  Copper Simon Hunt, founder of Simon Hunt Strategic Services, has over five decades experience in the mining and metals industries. He blends economic commentary with insights from metals industry contacts and technical pricing analysis to arrive at his forecasts of copper demand and copper prices. Simon's conclusions on copper prices coincide with ours: world industrial production will slow in 2010 from current levels as stimulus programmes are not redoubled in degree. Removal of quantitative easing will make it much more difficult for the financial sector to speculate in 2010 than it has been in 2009. Read about Simon's analysis in ExposAsia No 8/2009, Copper - Part of the money game. 23 July 2009 ExposAsia No 7/2009:  Hobgoblin? In ExposAsia No 7, Hobgoblin?, we re-examine our stand on the US economy and its prospects for 2010. We also look at the hard evidence in Asia of economic recovery. We find the bull case wanting on both counts. Maybe the real hobgoblins exist in the minds of market players that think this is a normal economic downturn? 30 June 2009 ExposAsia No 6/2009:  Free Liquidity In ExposAsia No 6, Free Liquidity, we examine the prospects for a continuation of easy money flows over the next few months. 19 June 2009 ExposAsia No 5/2009:  A Little More Knowledge ExposAsia No. 5/2009, A Little More Knowledge, concentrates on the views of our China, India and Japan experts interspersed with our own commentary. In short, watch out for policy measures in China to rein in 'over liquidity', don't expect too much in the way of reform measures from the new Indian government and rethink your equity strategies with respect to Japan. 3 June 2009 ExposAsia No 4/2009:  The Hardest Thing ExposAsia No. 4, The Hardest Thing, sets out to explain why the current rally is just a liquidity head fake that would die a death if there were any real substance to the 'green shoots' theory. In fact, the action in US interest rates and by governments across the world now make us much less optimistic about the economic outlook for 2010. Far from joining the consensus which believes that recovery is on the way in 2H09 we now expect the 2010 recovery to be delayed - there is just too much of a hole for the private sector to fill next year. 14 April 2009 ExposAsia No 3/2009:  The Great Mistake Cubed Despite being on holiday we just couldn't let the latest monetary data from China pass without comment. Read ExposAsia No 3, The Great Mistake Cubed. When it comes to China the collective investment and analytical community appears to be able to undertake the most willing suspension of disbelief. Even as Beijing embarks on policies that make Alan Greenspan look smart the world happily believes that the laws of economics apply to everyone except China. Unfortunately, that just isn’t so. The policies being undertaken by China at the moment are, in our book, among the worst responses to the global economic crisis that we have yet seen. 16 February 2009 ExposAsia No 2/2009:  The Great Mistake ExposAsia No 2/2009 (The Great Mistake) is on Chinese monetary data; it argues that Beijing’s response to the economic slowdown is a misunderstanding of the nature of the problem in the Chinese economy. Strong-arming the local banking system into lending as the recession gathers pace will be counterproductive.  5 January 2009 ExposAsia No 1/2009:  Rien Ne Va Plus Equity markets have started 2009 in buoyant mood. The rationale seems to be that the worst is over and, even if it isn't, the bad news is now in the price. But this approach fails to take account of the gigantic change in household behaviour and monetary conditions that are ongoing in the global economy. The bad news is that the world is now a changed place and the old investing metrics no longer apply. In ExposAsia No 1/2009 (Rien Ne Va Plus) we take a closer look at the bets being placed on Asian equity markets at the moment and conclude that they belong to the era of excess capital and above trend growth. Available to members only.