East meets West
“East meets West” - A Joint Chambers of Commerce Event 15 September 2011
John Hydeskov Chief Analyst Danske Markets Research +44 (0)20 7410 8144 +44 7881 508 042 [email protected] www.danskebank.com/research
www.danskeresearch.com
Will the global currency war escalate further?
www.danskeresearch.com
3
Is a trade crisis unavoidable?
www.danskeresearch.com
4
Do Sovereign Wealth Funds (SWF) lead to more or less economic and financial stability?
www.danskeresearch.com
5
Is the recent recovery in Foreign Direct Investments (FDI) sustainable? Outflows
Inflows
Source: UNCTAD www.danskeresearch.com
6
Flow situation (I): East → West or West → East?
www.danskeresearch.com
7
Flow situation (II): Developing ↔ developed or developing ↔ developing?
www.danskeresearch.com
8
Should we fear China and India? Global Competitiveness Rankings Country
Overall index
Basic requirements
Efficiency enhancers
Innovations and sophistication factors
Switzerland
1
2
4
2
Sweden
2
4
5
3
Singapore
3
3
1
10
United States
4
32
3
4
Germany
5
6
16
5
Japan
6
26
11
1
Finland
7
5
14
6
Netherlands
8
9
8
8
Denmark
9
7
9
9
Canada
10
11
6
14
Hong Kong
11
1
2
24
United Kingdom
12
18
7
12
Taiwan
13
19
16
7
Norway
14
17
12
17
France
15
16
15
16
# 27
# 51
Source: World Economic Forum www.danskeresearch.com
9
How to attract funding...?
www.danskeresearch.com
10
“East meets West” - A Joint Chambers of Commerce Event 15 September 2011
Overview of Sovereign Wealth Funds Nordic Chamber of Commerce – LSE Event – East meets West Roger Urwin 15th September 2011
© 2010 Towers Watson. All rights reserved.
SWFs in outline SWFs are a large and fast growing ‘asset owner’ with purposes that vary
Wealth creation and transfer across time
Macro-economic significance
Political significance
SWFs continue to be challenged by misunderstanding of their role and purpose
They hold up a mirror on the globalisation issues: global win-wins, protectionism, inter-generational equity, sustainability, markets over governments
These funds should become the pin-ups of the institutional funds world
towerswatson.com © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Investment strategy issues among SWFs
Organisational design – legitimacy, structure, mission
‘Return on mission’ – Finance, Politics, Other values
Inter-generational efficiency and equity
Globalisation challenges with reducing home bias
Strategic holdings
Sustainable investment
Governance – the gorilla in the room
towerswatson.com © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Where next for SWFs
New SWFs to emerge, in countries where none currently exist
Wider purpose, like playing a part in consolidation of public sector pensions funding
Other forms of collaboration, beyond Santiago Principles
Greater public interest will be focused on these funds with greater implied accountability
towerswatson.com © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
New Reality multi-polar geo-politics + new financial order + secular stresses
Demographics
Multi-polar power
Natural resources
New world order Extreme connectivity and complexity
Fiduciary capitalism
Imbalances/ fiscal indebtedness Capital market expansion
Bigger government
SWFs connect to and are connected to all these areas towerswatson.com © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
“East meets West” - A Joint Chambers of Commerce Event 15 September 2011
“Asian Company Raising capital in Europe” by: Anuj Gupta, CEO, Duet India
September 2011, London Stock Exchange
Contents
1. Introduction
5. Competing for Capital
2. Why Asia | India?
6. Pre crisis and Post
3. Capital Sources
7. Investee Key Learnings
4. Private vs. Public
8. Investor Key Learnings
Page 22
Company Overview Anuj Gupta
Partner Duet Group
Founded 4 companies across the real estate and infrastructure sectors – Duet India Group
Previously successfully built and exited IT an BPO businesses
Family business involved in Power EPC
Duet Group
A global alternative asset manager founded in 2002
Employs 75 professionals in London, New York, Tokyo, Singapore, New Delhi, and Dubai
HEDGE FUNDS
Has over $2.5 billion of equity under management divided across three asset classes;
REAL ESTATE & INFRASTRUCTURE FUND OF HEDGE FUNDS
Duet India Group
A real estate and infrastructure group that has developed 4 businesses in asset-heavy fast-growth sectors – Real estate, Hotels and Infrastructure
160 person team managing 14 projects in 10 cities with approx 4,000 construction staff, representing $2.0 billion of estimated project cost and $700 million of capital raised
Businesses originate, own, develop and operate the projects
Local management for each business with extensive local know how and network
Page 23
Why Asia? Why Asia?
Asian Economies are amongst the fastest growing economies in the world; Asia will account for half of all global economic output by 2050 if it can maintain its current growth rate
High Gross Domestic Saving and Gross Domestic Capital Formation rates
Low levels of consumer debt
Middle class and urban population growth driving consumer goods and infrastructure demand
Ranking of GDP Growth 2006-20, % p.a. (Deutsche Bank Research, Formel G)
Page 24
Why India? Why India?
Amongst the fastest growing economies in the world with GDP of $1.75 trillion and stock market capitalisation of $1.6 trillion
Average annual GDP growth of 7% over the past 10 years, forecast to be 8.6% in 2010-11 and 9% in 2011-12
High Gross Domestic Saving and Gross Domestic Capital Formation rate of 35% of GDP as of 2010
Stock market (NSEI) growth of 66% over the last five years
Majority of GDP growth is driven by domestic demand
Urban population of 340 million in 2008, up from 290 million in 2001 and forecast to increase to at least 590 million by 2030
Middle class forecast to increase to 40% of the population by 2027, up from 5% of the population in 2007
One of the few countries in the world forecast to have an increasing proportion of earning population out to 2025
India’s GDP (growth rate)
S&P CNX Nifty Index (NSEI), S&P 500 & FTSE 100 (comparison)
10.0 8.0 6.0 4.0 2.0 2005 2006 2007 2008 2009 2010 Annual average
Average 2005 -2010
Page 25
Capital Sources By Class
By Geography
Private Equity
United States
Capital Markets
Europe
Sovereign Wealth Funds
MENA
Hedge Funds
Asia (Exc. Japan)
Pension Funds
Japan
Insurance Companies
Local India
Long Only
Fund of Funds
Money Market Funds
“Matching of product and investor set” “Economic Cycle”
Page 26
Private vs. Public PUBLIC MARKET STRUCTURE MANAGEMENT CORPORATE GOVERNANCE DISCLOSURE REPORTING COSTS MATURITY OF BUSINESS REGULATTION TIME TO MARKET
PRIVATE EQUITY
•
Permanent capital vehicles
•
Limited life vehicle
•
Internally managed
•
Externally managed
• •
High Independent
• •
Low Non-independent
•
High
•
Low
•
Monthly reporting
•
Reporting less frequently
•
Higher
•
Lower
•
Mature
•
Early stage
•
High
•
Unregulated
•
9-12 months
•
3 months
Page 27
Competing for Capital •
Whenever there's a crisis, the money goes back to the west
•
In the long term capital allocation to Asia is increasing
Developed Markets
•
Asia
China
India
Growth
1-3%
5-9%
7-10%
6-9%
Allocation
90%
10%
3%
< 2%
Investment managers turn to emerging markets to generate higher returns
Page 28
Capital Raising Pre and Post Crisis Pre-Crisis
Crisis
Post Crisis
Now
Investor interest in Asia
High
Low
Low
High
Client Conversion Ratio
High
Low
Low
Low
Public Equities Appetite
High
Low
High
Low
Private Equity Appetite
High
Low
Low
High
“Investors are holding onto cash due to fear and uncertainty”
Page 29
Investee Key Learnings Structure
Disintermediation
Tax efficiency & compliance
Product and Management
Product value proposition
Clarity of presentation and strategy
Corporate Governance and Investors relations
Management track record essential
Local expertise and networks
Referenceability
Exit Track Record
Timing
Raise money when you can
Start ups not preferred – set up with seed capital, secondary fundraising can follow
Governance
Disclosure and Corporate governance
Investor relations and Reporting
Page 30
Investor Key Learnings Structure
Simple, tax efficient structures
Investments with control of project development and operations
Link management incentives to Investor cash realisation; disclosed up front
Product and Management
Early stage investment – low or no premium at entry
Smaller niche investment strategies
Local expertise vs. international expertise
Focus
Timing
Short windows of opportunity – “analysis paralysis”
Page 31
“East meets West” - A Joint Chambers of Commerce Event 15 September 2011
East Meeting West – When Capital Meets Danish-UK Chamber of Commerce
Best Global Independent Investment Bank 2010
September 2011
Most Innovative Boutique of the Year 2010
Moelis & Company Overview Leading independent investment bank with over 350 investment bankers focused across all major sectors Aerospace & Defense
LONDON| NEW YORK | HONG KONG | BEIJING | DUBAI | SYDNEY | BOSTON | CHICAGO | HOUSTON | LOS ANGELES
Automotive & Transportation Chemicals
Global investment bank with over 500 employees founded in July 2007
Provides financial advisory services on Mergers & Acquisitions, Recapitalization & Restructuring, Capital Markets, Risk Advisory and other strategic matters
Named Best Global Independent Investment Bank in 2010 by Euromoney Magazine and Most Innovative Boutique in 2010 by The Banker
Broke into top 10 M&A league tables in first year of operations
Ranked No. 3 global restructuring advisor in 2010
$4.1 billion asset management business with capabilities in credit and private equity
Recently announced a Japanese strategic alliance with SMBC Nikko
Consumer & Retail Financial Institutions Financial Sponsors Healthcare Homebuilding & Building Products Hotels & Gaming Media & Broadcasting Metals & Mining Paper & Packaging Power & Infrastructure Oil & Gas Real Estate Restaurants Technology Telecommunications [1]
Awards and Commentary from Distinguished Voices AWARDS
COMMENTARY
“ …[The] firm is focused on delivering independent advice.” – October 2010 “…Moelis makes sure that the most senior people…are actively advising…Indeed, the deal roster indicates a global breadth that even the large incumbents must envy.” – July 2010 “…Bollenbach says…‘[Moelis] comes as close as anyone I’ve ever met to an old-time banker, as in advice that is not corrupted by his own interests.’ ” – September 2009 “The firm has worked on some of the largest mergers and acquisitions announced in the last two years.” – April 2009
Best Global Independent Investment Bank
2010 Restructuring Deal of the Year: Dubai World
2009 & 2010 Banker of the Year: Kenneth Moelis
“The business model of Moelis & Co…focuses on the human capital side of the investment banking business as opposed to the balance sheet side.” – October 2008 “[Moelis believes] strongly in the primary role of the banker as a trusted confidant and consigliere to CEOs and potentates.” – April 2008
2010 Entrepreneurial Award Honoree: Kenneth D. Moelis Moelis & Company [2]
Executive Summary
1. What will the world look like in 2050?
2. Who is driving that change?
3. What does the west seek from the emerging economies?
4. What do the emerging economies look for in the west?
5. What is the impact on the flow of direct investments?
[3]
What the world will look like in 2050? G7 will be surpassed by the E7 - China, India, Brazil, Russia, Mexico, Indonesia and Turkey
[4]
Middle Class in the Emerging Economies
MIDDLE CLASS RISE1
Developing Asia
Latin America & Caribbean
Africa
Billion People
0.0
0.5
1.0 1990
Source: Note: 1.
African Development Bank; Asian Development Bank People living on $2-20 per day at 2005 $ PPP
1.5
2.0
2008
[5]
Middle Class in the United States
MIDDLE CLASS SQUEEZE Rising income disparity Gini index of income inequality
Declining middle-class income Median individual income $28,000
0.48
2000
0.47 $26,000
0.46
2010
0.45 $24,000
0.44 0.43
$22,000
Greater disparity
0.42 0.41
$20,000
0.40 0.39
$18,000
0.38 1970s
1980s
1990s
2000s
1970s
1980s
1990s
2000s
[6] Source:
IMF
Western Companies Seeking Emerging Market Demand
COMPANIES THAT DERIVE MAJORITY OF THEIR GROWTH/PROFITS FROM THE EAST
Chinese with income over $100k are buying five times as many premium cars as Americans
50% of BMW’s 2011 profits expected to come from China
2010 Revenues -
Spain (10%)
-
Italy (1.5%)
-
India +17%
-
Turkey +32%
[7]
Western Companies Seeking Emerging Market Capital
WESTERN COMPANIES LISTED OR PREPARING FOR LISTING IN THE EAST
[8]
Emerging Markets Have Capital And Seek Natural Resources, Key Technologies
CHINA OUTBOUND M&A DEAL VALUE BY SECTOR, 2003 - 2010
CHINA OUTBOUND M&A DEAL VALUE BY REGION, 2003 - 2010
North America Energy, Mining & Utilities
Western Europe
10%
10%
6%
Financial Services
5%
26%
South East Asia
5%
8%
Australasia 7% Africa
Industrials & Chemicals 13%
8%
63% TMT
Central & Eastern Europe 21%
9% 9%
Northern Europe
Other
$146 bn
South America
$146 bn
Other
[9]
Foreign Direct Investments in Emerging Markets ($bn)
249.6 211.9 42.7
40.0
1995
2000
2005
2011
Emerging Europe
183.3 39.7
85.9
150.9
89.8
1995 2000 2005 2011
Latin America
74.1 16.8
9.2
1995
2000
226.5 269.8 87.9
81.3 1995
2000
2005
2011
Emerging Asia 2005
2011
Africa/Middle East
[ 10 ] Source:
FT.com Interactive
John Hydeskov Chief Analyst Danske Markets Research +44 (0)20 7410 8144 +44 7881 508 042 [email protected] www.danskebank.com/research
www.danskeresearch.com
Will the global currency war escalate further?
www.danskeresearch.com
3
Is a trade crisis unavoidable?
www.danskeresearch.com
4
Do Sovereign Wealth Funds (SWF) lead to more or less economic and financial stability?
www.danskeresearch.com
5
Is the recent recovery in Foreign Direct Investments (FDI) sustainable? Outflows
Inflows
Source: UNCTAD www.danskeresearch.com
6
Flow situation (I): East → West or West → East?
www.danskeresearch.com
7
Flow situation (II): Developing ↔ developed or developing ↔ developing?
www.danskeresearch.com
8
Should we fear China and India? Global Competitiveness Rankings Country
Overall index
Basic requirements
Efficiency enhancers
Innovations and sophistication factors
Switzerland
1
2
4
2
Sweden
2
4
5
3
Singapore
3
3
1
10
United States
4
32
3
4
Germany
5
6
16
5
Japan
6
26
11
1
Finland
7
5
14
6
Netherlands
8
9
8
8
Denmark
9
7
9
9
Canada
10
11
6
14
Hong Kong
11
1
2
24
United Kingdom
12
18
7
12
Taiwan
13
19
16
7
Norway
14
17
12
17
France
15
16
15
16
# 27
# 51
Source: World Economic Forum www.danskeresearch.com
9
How to attract funding...?
www.danskeresearch.com
10
“East meets West” - A Joint Chambers of Commerce Event 15 September 2011
Overview of Sovereign Wealth Funds Nordic Chamber of Commerce – LSE Event – East meets West Roger Urwin 15th September 2011
© 2010 Towers Watson. All rights reserved.
SWFs in outline SWFs are a large and fast growing ‘asset owner’ with purposes that vary
Wealth creation and transfer across time
Macro-economic significance
Political significance
SWFs continue to be challenged by misunderstanding of their role and purpose
They hold up a mirror on the globalisation issues: global win-wins, protectionism, inter-generational equity, sustainability, markets over governments
These funds should become the pin-ups of the institutional funds world
towerswatson.com © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Investment strategy issues among SWFs
Organisational design – legitimacy, structure, mission
‘Return on mission’ – Finance, Politics, Other values
Inter-generational efficiency and equity
Globalisation challenges with reducing home bias
Strategic holdings
Sustainable investment
Governance – the gorilla in the room
towerswatson.com © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Where next for SWFs
New SWFs to emerge, in countries where none currently exist
Wider purpose, like playing a part in consolidation of public sector pensions funding
Other forms of collaboration, beyond Santiago Principles
Greater public interest will be focused on these funds with greater implied accountability
towerswatson.com © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
New Reality multi-polar geo-politics + new financial order + secular stresses
Demographics
Multi-polar power
Natural resources
New world order Extreme connectivity and complexity
Fiduciary capitalism
Imbalances/ fiscal indebtedness Capital market expansion
Bigger government
SWFs connect to and are connected to all these areas towerswatson.com © 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
“East meets West” - A Joint Chambers of Commerce Event 15 September 2011
“Asian Company Raising capital in Europe” by: Anuj Gupta, CEO, Duet India
September 2011, London Stock Exchange
Contents
1. Introduction
5. Competing for Capital
2. Why Asia | India?
6. Pre crisis and Post
3. Capital Sources
7. Investee Key Learnings
4. Private vs. Public
8. Investor Key Learnings
Page 22
Company Overview Anuj Gupta
Partner Duet Group
Founded 4 companies across the real estate and infrastructure sectors – Duet India Group
Previously successfully built and exited IT an BPO businesses
Family business involved in Power EPC
Duet Group
A global alternative asset manager founded in 2002
Employs 75 professionals in London, New York, Tokyo, Singapore, New Delhi, and Dubai
HEDGE FUNDS
Has over $2.5 billion of equity under management divided across three asset classes;
REAL ESTATE & INFRASTRUCTURE FUND OF HEDGE FUNDS
Duet India Group
A real estate and infrastructure group that has developed 4 businesses in asset-heavy fast-growth sectors – Real estate, Hotels and Infrastructure
160 person team managing 14 projects in 10 cities with approx 4,000 construction staff, representing $2.0 billion of estimated project cost and $700 million of capital raised
Businesses originate, own, develop and operate the projects
Local management for each business with extensive local know how and network
Page 23
Why Asia? Why Asia?
Asian Economies are amongst the fastest growing economies in the world; Asia will account for half of all global economic output by 2050 if it can maintain its current growth rate
High Gross Domestic Saving and Gross Domestic Capital Formation rates
Low levels of consumer debt
Middle class and urban population growth driving consumer goods and infrastructure demand
Ranking of GDP Growth 2006-20, % p.a. (Deutsche Bank Research, Formel G)
Page 24
Why India? Why India?
Amongst the fastest growing economies in the world with GDP of $1.75 trillion and stock market capitalisation of $1.6 trillion
Average annual GDP growth of 7% over the past 10 years, forecast to be 8.6% in 2010-11 and 9% in 2011-12
High Gross Domestic Saving and Gross Domestic Capital Formation rate of 35% of GDP as of 2010
Stock market (NSEI) growth of 66% over the last five years
Majority of GDP growth is driven by domestic demand
Urban population of 340 million in 2008, up from 290 million in 2001 and forecast to increase to at least 590 million by 2030
Middle class forecast to increase to 40% of the population by 2027, up from 5% of the population in 2007
One of the few countries in the world forecast to have an increasing proportion of earning population out to 2025
India’s GDP (growth rate)
S&P CNX Nifty Index (NSEI), S&P 500 & FTSE 100 (comparison)
10.0 8.0 6.0 4.0 2.0 2005 2006 2007 2008 2009 2010 Annual average
Average 2005 -2010
Page 25
Capital Sources By Class
By Geography
Private Equity
United States
Capital Markets
Europe
Sovereign Wealth Funds
MENA
Hedge Funds
Asia (Exc. Japan)
Pension Funds
Japan
Insurance Companies
Local India
Long Only
Fund of Funds
Money Market Funds
“Matching of product and investor set” “Economic Cycle”
Page 26
Private vs. Public PUBLIC MARKET STRUCTURE MANAGEMENT CORPORATE GOVERNANCE DISCLOSURE REPORTING COSTS MATURITY OF BUSINESS REGULATTION TIME TO MARKET
PRIVATE EQUITY
•
Permanent capital vehicles
•
Limited life vehicle
•
Internally managed
•
Externally managed
• •
High Independent
• •
Low Non-independent
•
High
•
Low
•
Monthly reporting
•
Reporting less frequently
•
Higher
•
Lower
•
Mature
•
Early stage
•
High
•
Unregulated
•
9-12 months
•
3 months
Page 27
Competing for Capital •
Whenever there's a crisis, the money goes back to the west
•
In the long term capital allocation to Asia is increasing
Developed Markets
•
Asia
China
India
Growth
1-3%
5-9%
7-10%
6-9%
Allocation
90%
10%
3%
< 2%
Investment managers turn to emerging markets to generate higher returns
Page 28
Capital Raising Pre and Post Crisis Pre-Crisis
Crisis
Post Crisis
Now
Investor interest in Asia
High
Low
Low
High
Client Conversion Ratio
High
Low
Low
Low
Public Equities Appetite
High
Low
High
Low
Private Equity Appetite
High
Low
Low
High
“Investors are holding onto cash due to fear and uncertainty”
Page 29
Investee Key Learnings Structure
Disintermediation
Tax efficiency & compliance
Product and Management
Product value proposition
Clarity of presentation and strategy
Corporate Governance and Investors relations
Management track record essential
Local expertise and networks
Referenceability
Exit Track Record
Timing
Raise money when you can
Start ups not preferred – set up with seed capital, secondary fundraising can follow
Governance
Disclosure and Corporate governance
Investor relations and Reporting
Page 30
Investor Key Learnings Structure
Simple, tax efficient structures
Investments with control of project development and operations
Link management incentives to Investor cash realisation; disclosed up front
Product and Management
Early stage investment – low or no premium at entry
Smaller niche investment strategies
Local expertise vs. international expertise
Focus
Timing
Short windows of opportunity – “analysis paralysis”
Page 31
“East meets West” - A Joint Chambers of Commerce Event 15 September 2011
East Meeting West – When Capital Meets Danish-UK Chamber of Commerce
Best Global Independent Investment Bank 2010
September 2011
Most Innovative Boutique of the Year 2010
Moelis & Company Overview Leading independent investment bank with over 350 investment bankers focused across all major sectors Aerospace & Defense
LONDON| NEW YORK | HONG KONG | BEIJING | DUBAI | SYDNEY | BOSTON | CHICAGO | HOUSTON | LOS ANGELES
Automotive & Transportation Chemicals
Global investment bank with over 500 employees founded in July 2007
Provides financial advisory services on Mergers & Acquisitions, Recapitalization & Restructuring, Capital Markets, Risk Advisory and other strategic matters
Named Best Global Independent Investment Bank in 2010 by Euromoney Magazine and Most Innovative Boutique in 2010 by The Banker
Broke into top 10 M&A league tables in first year of operations
Ranked No. 3 global restructuring advisor in 2010
$4.1 billion asset management business with capabilities in credit and private equity
Recently announced a Japanese strategic alliance with SMBC Nikko
Consumer & Retail Financial Institutions Financial Sponsors Healthcare Homebuilding & Building Products Hotels & Gaming Media & Broadcasting Metals & Mining Paper & Packaging Power & Infrastructure Oil & Gas Real Estate Restaurants Technology Telecommunications [1]
Awards and Commentary from Distinguished Voices AWARDS
COMMENTARY
“ …[The] firm is focused on delivering independent advice.” – October 2010 “…Moelis makes sure that the most senior people…are actively advising…Indeed, the deal roster indicates a global breadth that even the large incumbents must envy.” – July 2010 “…Bollenbach says…‘[Moelis] comes as close as anyone I’ve ever met to an old-time banker, as in advice that is not corrupted by his own interests.’ ” – September 2009 “The firm has worked on some of the largest mergers and acquisitions announced in the last two years.” – April 2009
Best Global Independent Investment Bank
2010 Restructuring Deal of the Year: Dubai World
2009 & 2010 Banker of the Year: Kenneth Moelis
“The business model of Moelis & Co…focuses on the human capital side of the investment banking business as opposed to the balance sheet side.” – October 2008 “[Moelis believes] strongly in the primary role of the banker as a trusted confidant and consigliere to CEOs and potentates.” – April 2008
2010 Entrepreneurial Award Honoree: Kenneth D. Moelis Moelis & Company [2]
Executive Summary
1. What will the world look like in 2050?
2. Who is driving that change?
3. What does the west seek from the emerging economies?
4. What do the emerging economies look for in the west?
5. What is the impact on the flow of direct investments?
[3]
What the world will look like in 2050? G7 will be surpassed by the E7 - China, India, Brazil, Russia, Mexico, Indonesia and Turkey
[4]
Middle Class in the Emerging Economies
MIDDLE CLASS RISE1
Developing Asia
Latin America & Caribbean
Africa
Billion People
0.0
0.5
1.0 1990
Source: Note: 1.
African Development Bank; Asian Development Bank People living on $2-20 per day at 2005 $ PPP
1.5
2.0
2008
[5]
Middle Class in the United States
MIDDLE CLASS SQUEEZE Rising income disparity Gini index of income inequality
Declining middle-class income Median individual income $28,000
0.48
2000
0.47 $26,000
0.46
2010
0.45 $24,000
0.44 0.43
$22,000
Greater disparity
0.42 0.41
$20,000
0.40 0.39
$18,000
0.38 1970s
1980s
1990s
2000s
1970s
1980s
1990s
2000s
[6] Source:
IMF
Western Companies Seeking Emerging Market Demand
COMPANIES THAT DERIVE MAJORITY OF THEIR GROWTH/PROFITS FROM THE EAST
Chinese with income over $100k are buying five times as many premium cars as Americans
50% of BMW’s 2011 profits expected to come from China
2010 Revenues -
Spain (10%)
-
Italy (1.5%)
-
India +17%
-
Turkey +32%
[7]
Western Companies Seeking Emerging Market Capital
WESTERN COMPANIES LISTED OR PREPARING FOR LISTING IN THE EAST
[8]
Emerging Markets Have Capital And Seek Natural Resources, Key Technologies
CHINA OUTBOUND M&A DEAL VALUE BY SECTOR, 2003 - 2010
CHINA OUTBOUND M&A DEAL VALUE BY REGION, 2003 - 2010
North America Energy, Mining & Utilities
Western Europe
10%
10%
6%
Financial Services
5%
26%
South East Asia
5%
8%
Australasia 7% Africa
Industrials & Chemicals 13%
8%
63% TMT
Central & Eastern Europe 21%
9% 9%
Northern Europe
Other
$146 bn
South America
$146 bn
Other
[9]
Foreign Direct Investments in Emerging Markets ($bn)
249.6 211.9 42.7
40.0
1995
2000
2005
2011
Emerging Europe
183.3 39.7
85.9
150.9
89.8
1995 2000 2005 2011
Latin America
74.1 16.8
9.2
1995
2000
226.5 269.8 87.9
81.3 1995
2000
2005
2011
Emerging Asia 2005
2011
Africa/Middle East
[ 10 ] Source:
FT.com Interactive
