Posts Tagged ‘Asia’

Who Wants To Be a Millionaire?

Tuesday, July 10th, 2012

Wobbly economies that shook up markets in 2011 took their toll on the world’s rich, though fast-growing Asia for the first time had more millionaires than North America.  According to the report, the global personal wealth of people worth $1 million declined in 2011 for the second time in four years, a side effect of the Eurozone crisis and economic sluggishness in developed markets.  Several emerging markets also suffered, with the number of millionaires in India and Hong Kong falling by nearly 20 percent.  With Europe’s debt crisis bedeviling the continent, the outlook for wealth creation in 2012 remains weak, according to a report prepared by Capgemini and RBC Wealth Management.

The world’s millionaires grew by 0.8 percent to a record 11 million, according to the report, yet their collective wealth fell by 1.7 percent to $42 trillion.  Only the Middle East experienced no decline in wealth.  It was the first global decline in millionaire wealth since the 2008 financial crisis, when the ranks of the wealthy fell 15 percent and their wealth declined by 20 percent.

Families worth $30 million or more saw their collective wealth fall 4.9 percent and their ranks shrink by 2.5 percent to just 100,000 individuals.  This decline reflects holdings in higher-risk and less liquid investments like hedge funds, private equity and real estate.

“It was a challenging environment for our clients,” George Lewis, global head of wealth management at Royal Bank of Canada, said.  The Toronto banking giant began sponsoring the widely watched report in May.  Lewis pointed out that the number of high net worth individuals rose even as overall wealth fell.  “It at least suggests there continues to be upward mobility and the ability to generate wealth around the world,” he said.

Curious about how many millionaires live in nations around the world?  Read this:  Singapore toppled Hong Kong as home to Asia’s wealthiest in 2011 as declining stock markets hit the former British territory significantly harder than its Southeast Asian rival.  Hong Kong, whose stock market capitalization fell by 16.7 percent last year, saw a bigger decline in the ranks of people with more than $1 million to invest as a larger proportion of that wealth was tied up in equity.  Southeast Asia also has shown stronger signs of resilience to global turmoil than the rest of Asia as domestic spending offset struggling exports.  The number of millionaires in Hong Kong fell 17.4 percent to 83,600 last year, compared with a decline of 7.8 percent to 91,200 people in Singapore, according to RBC Wealth’s head of emerging markets Barend Janssens.  Hong Kong took the lead from Singapore in 2010 after falling behind in 2008.

China still is home to the most high net worth individuals in Asia Pacific, with a population of 562,000 millionaires.  The top five countries by population of high net worth individuals are the US (3.07 million), Japan (1.82 million), Germany (951,000), China and the United Kingdom (441,000).  According to RBC, this significant concentration of high net worth individuals is why wealth managers are attracted to Asia even if they have to contend with competition from domestic banks.

Are the troubles in the Eurozone likely to impact Asia?  Lessons learned from the 2008 financial meltdown show that while Asia tends to get hit when the world economy stumbles, the severity varies depending on which countries have the biggest trade and financial linkages, and are best-prepared with big currency reserves, overflowing government coffers and central banks with the ability to cut interest rates.  Generally speaking, Asia has more room than the West to react with interest-rate cuts and government spending.  But some things have changed since 2008, and some countries, primarily India, Vietnam and Japan, may not be in shape to survive another financial jolt.  “As we saw with Lehman, when you get a seizure in the global financial system, nobody can hide from that in the short run,” said Richard Jerram, chief economist at the Bank of Singapore.  In that type scenario — which analysts say could still occur if Greece doesn’t live up to its commitments and leaves the Euro, or Spain and Italy require a bailout that Europe can’t afford — Asian stocks and currencies would fall, shipping lanes would see less business, and lending to consumers and businesses would dry up, slowing world economies.

World Bank Head Predicts No “Double-Dip” Recession

Wednesday, September 28th, 2011

World Bank President Robert Zoellick believes the world will not slide into a double-dip recession. Zoellick was in Singapore, attending an economic conference amid plummeting world stock prices and worries over a slowdown in U.S. economic growth.  Zoellick believes the United States and the world will avoid a “double-dip” recession, but admitted that growth is likely to remain sluggish and prospects are uncertain.  Zoellick said the world is entering a “dangerous period,” noting that the United States could reassure markets with steps to put the brakes on increasing its debt, rather than making deep cuts in spending.

Zoellick’s comments add pressure on European officials who are trying to contain a sovereign debt crisis that threatens Italy, whose government bonds in euros have declined a record 11 consecutive days.  Finland has fostered division among policy makers by looking for collateral for loans to Greece, the first of the three euro-region nations to receive bailouts so far.  American and European economies are stalling and feeble global growth are impacting Asia, Singapore’s Minister of Finance Tharman Shanmugaratnam said.  Growth in the U.S. and Europe may be just one percent.

“We’re already at stall speed in the U.S. and Europe, which means we’re now more likely than not to see a recession,” Shanmugaratnam said.  Companies are holding back spending and consumers globally lack confidence.  Zoellick tamped down the likelihood of a “double-dip” global recession in comments to reporters in Singapore today.   Still, “we are now seeing a particularly sensitive time in the euro zone,” the World Bank chief said.  “A number of issues are converging.”

“These things are very hard to predict because if you have events trigger uncertainty in Europe, that will flow back to the U.S.,” Zoellick said.  The eurozone’s performance “depends on the political decisions moving forward,” he said.  The euro will survive in the next five years, although the question over membership of the common currency is one that Europeans must answer.  “Sometimes people hope that you can muddle through by providing financing and liquidity, in the case of Europe, from the European Financial Stability Facility or the European Central Bank,” Zoellick said.  “They now recognize that’s not going to happen and instead what you see is with some of the weaker economies, that the austerity policies are pushing them into slower and slower growth and so this could be a downward spiral.”

According to Zoellick, recent European Central Bank government bond purchases have given temporary monetary liquidity to markets.  “The policies that have been pursued by the EU up to now can buy time, but parliaments and the public have to come to terms with fundamental questions,” Zoellick said.  One direction is to deepen the fiscal union.”

“They’ve tried to pump money into it, they’ve tried in the past month.  The ECB bought a lot of bonds.  But, I think dealing with these problems through liquidity measures will not be sufficient,” Zoellick said.  “Christine Lagarde of the International Monetary Fund (IMF) and I from a different position at the World Bank have been trying to prod people to recognize some of these questions.”  Lagarde, who told the Federal Reserve’s annual conference that European banks need urgent capitalization, angered some European policymakers and politicians with her opinions.

“People should not underestimate the European response, but Europeans should not be fooled that that type of response will deal with the fundamental questions that still need to be addressed,” Zoellick said.  The markets have been hoping for additional monetary stimulus from the Federal Reserve to relieve global growth concerns, but Zoellick said that monetary policy alone won’t do the job.  Rather, he said, the real solution to Europe’s crisis must be found to deal with the crisis.  “This one is really even beyond the finance ministers’ pay grade.  These are going to be the decisions that have to be made by the heads of government and supported by their parliaments,” he said.

American markets analyst Peter Kenny of Knight Capital said “We have a eurozone that is an apoplectic frenzy of just trying to right the ship.  If you can find some stabilizing influence in the eurozone to give the global markets some confidence, I’d be shocked.”  Parliaments in Germany and France currently debating the extent of their countries’ contribution to the European Financial Stability Facility, the fund set up to bail out any eurozone nations struggling with their debt obligations.

Richard Jeffrey, chief investment officer at Cazenove Capital Management, said that “Money that the key worry for the markets was the health of the world economy.  “If the world economy is slowing down or perhaps even moving into recession – I think that is less likely, but that is what people fear – then that has negative implications for the financial system and the banking sector.  The debt problems in the peripheral European economies rumble on, of course, but again their debt problems are helped if there is growth.  If there isn’t growth in the economies, then their debt problems become more difficult to support, so this is all interlinked.”

Vive la France!!!

Monday, August 8th, 2011

The popular image of French men and women spending their time in sidewalk cafes sipping aperitifs, smoking Gauloises and watching the world go by belies the fact that the nation’s residents work the least amount of hours in the world, yet are among the most productiveAccording to a recent UBS survey, people globally work an average of 1,902 hours annually.  The work day is even longer for people in Asian and Middle Eastern cities.  By contrast, residents of Paris and Lyon have the shortest workday at 1,582 and 1,594 hours annually, respectively.

In 2010, France’s GDP totaled $2.113 trillion; that represented a 1.6 percent growth rate and a GDP per capita of $38,016.  The French achieve their high standard of living while working 16 percent fewer hours than the average person, and nearly 25 percent less than their Asian peers.  Visit France and you’ll see that their standard of living is probably significantly higher than the GDP numbers indicate.  If you divide France’s GDP per capita by actual hours worked, you’d probably learn that the French are achieving some of the highest returns on work-hours invested.

Because healthcare and education are virtually free, the French have the ability to put more emphasis on family and pleasure rather than making a profit.  Additionally, the French have 11 national holidays every year and many workers take extra time off if those holidays occur on a Tuesday or Thursday.  Then there’s France’s legendary vacation time – which can range from five to eight weeks a year.  Despite this and with an unemployment rate of 9.5 percent as of May 2011, France remains the world’s fifth largest economy.  And the French achieve all that with a 35-hour workweek, which was adopted in 1998 in an effort to create more jobs for the unemployed.  The early retirement age is 62, although most French opt to retire at 65.

France scores among the top 10 in International Living magazine’s “Best Quality of Life” survey.  According to the article on the results of the 2011 survey, “Still, it can be useful to step back and see how each nation fares relative to others when we do consider these categories.  To come out ahead, a country must be an all-around good pick, not just a standout in one area or two. And that explains why the top finishers are developed nations like the U.S. and the rest of our top 10 — New Zealand, Malta, France, Monaco, Belgium, Japan, United Kingdom, Austria, and Germany.  None is among the most affordable nations on the planet.  But they all offer other benefits.  These nations are home to plenty of expats who are thrilled with life in their chosen havens.”

Writing on, Nobel Prize-winning economist Paul Krugman says that “It’s true that French GDP per capita (output divided by the number of people in the nation), for example, is only about three-quarters of the American level, when adjusted for purchasing power.  But when you look closely at that number, the story is certainly more complex than many people think.  Let’s look at data released by the Bureau of Labor Statistics in the United States — at data on France in particular, since that’s the country Americans have strong feelings about, right?  I’m going to focus on the data from 2008, not 2009.  In 2009, businesses in the United States laid off a lot of workers, while European firms did not.  That produced a divergence in productivity that had more to do with short-run business cycle events than with fundamental trends.  Data from 2008 allows for a better sense of the underlying differences.  GDP, per capita, per person, France produces 73 percent of what the United States produces in a year.  GDP per hour worked: A French worker produces about 99 percent of what an American worker produces in one hour.  Number of workers: For every 100 workers in the United States, France has about 84 workers.  Hours per worker: For every 100 hours an American works, a French person works about 88.  So French workers are roughly as productive as American workers.”

At present, France is the fastest growing economy in the European Union.  According to Ken Hurst of Works Management, “New productivity data published today (4 February) highlights a further rise in labor productivity across the European Union, thereby extending the current period of improvement to 21 months.  Furthermore, the pace of increase accelerated since December to a five-month high and put France in first place in the growth league.  Broken down by nation, the latest data highlighted gains across the EU’s four largest economies, the strongest of which was recorded in France – where output per employee rose at the strongest pace since last July.  Marked gains were recorded in both the manufacturing and service sectors.”

Luxury Goods Sales Are Breaking Records

Thursday, August 26th, 2010

What recession?  Luxury goods going through the roof.  Sales of luxury goods are doing quite well, according to a recent report from LVMH, the manufacturer of Louis Vuitton bags and accessories and Dom Perignon champagne.  The world’s largest luxury goods purveyor, LVMH reported a 53 percent increase in net profits to €1.1 billion ($1.4 billion) on sales of €6.9 billion in the 1st half of 2010.  According to Bernard Arnault, LVMH chairman, the increase is due to his company’s status as “pioneer, and its early implantation in regions with strong growth.”  Similarly, apparel notables Burberry and Hermes experienced a 27 percent increase in sales during the 1st quarter.  Luxury cars like BMW and Porsche once again are in strong demand.  However, Pam Danziger, president of Unity Marketing, urged caution.  “We expect the pace of growth in luxury consumer spending to remain modest over the next two quarters,” Danziger said.

Larry Armstrong: Architecture During a Recession

Monday, June 29th, 2009

The best way to survive a recession is to have a strategic plan firmly in place when the inevitable downturn happens.  That’s the opinion of Larry Armstrong, President of Ware Malcomb, an Irvine, CA-based international architectural firm with ongoing projects in the United States, Latin America, Asia and Europe.

architect_istock5775134In a recent interview for the Alter NOW Podcasts, Armstrong says “There is no question that we learned everything about saving a business and building a business during the 1990s downturn.”  In fact, Armstrong’s firm wrote a recession plan several years ago and determined exactly how they would react.  “You have to look at what revenue can support what level of staff and all the additional expenses and costs which, over time, become discretionary.  You have to look at those and decide what is necessary and what isn’t,” according to Armstrong.

The current environment does not support ego-driven, icon architecture.  Rather, there is a move towards thrift, because corporate users want to be seen as economical and functional — not as extravagant.  The recession also has impacted Corporate America’s attitude towards green design and LEED-certified buildings.  According to Armstrong, “We’re seeing a bit of a retreat – not major – and a vast majority of our projects are still LEED certified”.  Still, if the project is industrial, Armstrong is not hearing a desire for LEED certification anymore.

To listen to Larry Armstrong’s full interview on architecture during a recession, click here for the podcast.

icon for podpress  Larry Armstrong on Architecture in a Recession: Play Now | Play in Popup | Download

No Port in the Global Fiscal Storm

Wednesday, April 22nd, 2009

Shipping activity has plunged as much as one-third at U.S. ports most heavily invested in the once red-hot but now declining Asia trade. 

Freight rates from South China to Europe have slid as much as 42 percent from some ports since November, leading shipping industry authority Drewry Container Freight Rate Insight Report to speculate that this once-robust market is in freefall.titanic-sinking-7790481

As freight rates fall to record lows shipping companies are playing hardball to remain competitive, even though relatively little product is being shipped these days.  According to Drewry, container lines could see a $68 billion plunge in global revenues this year, compared with 2008 revenues of $220 billion.  Drewry notes that global all-in freight rates fell to $1,681 per 40-foot box, down from $2,098 in November.  That’s a steep $400 drop per feu (forty-foot equivalent unit) or 20 percent in just two months.

The ports of Los Angeles and Long Beach are slashing cargo rates to retain old customers and attract whatever new business they can.  Spanning 10,000 acres, these vast ports typically handle $357 billion in goods every year.  The ripple effect of this year’s overall 18.1 percent downturn is evident in California’s vital Inland Empire logistics market, where higher vacancy rates – now approaching nine percent — are translating to cheaper rents.

Conditions are slightly better at the East Coast ports of New York and New Jersey, because their diverse mix of trading partners include Asia, Europe, Latin America and South America.

Foreign Investors Like Luxury

Friday, October 24th, 2008

Volatile oil prices will minimally impact global air-freight growth over the long term, according to a Boeing Company report cited in a recent article.  The Chicago-based aircraft manufacturing giant’s Current Market Outlook 2008 predicts that growth will achieve an annualized average rate of 5.8 percent from 2007 through 2027.  Similarly, the report projects that the world freighter fleet will nearly double from 1,948 planes today to 3,892 over the next 20 years.

“The forecast is based on a number of factors, most significantly economic growth in diverse areas of the world,” said Jim Edgar, Boeing’s regional director, cargo marketing for Asia.  “Over the long term, global economic growth will drive demand for new, high-value products as well as seasonal perishables that people have become accustomed to enjoying.”

The report notes that the nature of the air-freighter fleet will change as larger aircraft increase their market share.  Currently, the largest freighters make up 26 percent of the market; in 20 years, that number will rise to 35 percent.  Fleet additions will include 863 new-production aircraft; 641 of those will be wide-body planes with the capacity to carry more than 80 tons.  The share of standard-body freighters (defined as having less than a 45-ton capacity with single-aisle body width) will fall from 39 percent to 35 percent over the next 20 years.

“We expect several trends to continue,” according to Edgar.  “Dedicated freighters will continue to provide an increasing proportion of air-cargo capacity, going to nearly 54 percent, and the industry will continue to move to larger airplanes.”

High Costs Could Impact Shipping Routes

Wednesday, September 24th, 2008

Two trends in international trade worth highlighting:

American exports are booming, thanks to the dollar’s current weakness.  This considerable increase in volume has made it virtually impossible for U.S. manufacturers to get space on container ships within a four-week window, especially for products shipping from the ports of Los Angeles or Long Beach to any Pacific Rim destination.  To illustrate the scope of the change, container space from these ports was available on demand just one year ago.  And, according to a recent Reuters article, waiting times for cargo space have jumped from two days to three weeks on the East Coast.

Fast-rising transportation costs that are a direct result of the cost of fuel is another important logistics trend – one that could negatively impact globalization.  According to an August 2 article in the International Herald Tribune by Larry Rohter, shipping a single loaded 40-foot container from Shanghai to the United States has soared to as much as $8,000 per unit, compared with just $3,000 earlier in the decade.  Additionally, there are cost add-ons, primarily in the form of fuel surcharges and government-mandated fees.  To save on fuel costs, container ships have shaved their top speeds by nearly 20 percent, which means it takes longer for products to reach their intended markets.

Shipping to and from Prince Rupert in British Columbia is slightly less costly, because the distance to Asian ports is shorter than from Los Angeles or Long Beach.  Still, space amounts to several thousand dollars per container.

“If prices stay at these levels, that could lead to some significant rearrangement of production, among sectors and countries,” said C. Fred Bergsten, author of The United States and the World Economy and a director of the Peter G. Peterson Institute for International Economics in Washington.  “You could have a very significant shock to traditional consumption patterns and also some important growth effects.”

A far better alternative could be to ship to and from Asia from the southern border regions, where the going rate is approximately $800 per loaded container.  That price differential could potentially lure companies to move production facilities to Mexico or the Southwestern United States – primarily Texas.  This would give them the opportunity to leverage the more attractive shipping rates through the growing Mexican ports of Lazaro Cardenas and Punto Colonet.