asean economic outlook
TRANSCRIPT
1
January 2016
Will it Continue?
The Asian Miracle
Francis TanUOB Global Economics & Markets Research
UOB Global Economics & Markets Research
Disclaimers
2
This presentation was prepared for informational purposes only and shall not be copied, orrelied upon by any other person for whatever purpose. This presentation must be viewed inconjunction with the oral presentation provided by UOB and/or its officially appointeddistributors/agents. Nothing in this presentation constitutes accounting, legal, regulatory, taxor other advice. The reader(s) of this document should consult his/their own professionaladvisors about the issues discussed herein. This presentation is not intended as an offer orsolicitation with respect to the purchase or sale of any investment product and nothing hereinshould be construed as a recommendation to transact in any investment product. To invest,please refer to the prospectus (where applicable) for details.
UOB Global Economics & Markets Research
Recap: 2013 ����Will Growth-Inflation Puzzle Continue
3
UOB Global Economics & Markets Research
Recap: 2014 ���� Of US Rates & Asian Trade
4
UOB Global Economics & Markets Research
Recap: 1H2015 ���� Near-term Challenges, Long-term Goals
5
UOB Global Economics & Markets Research
Recap: 2H2015 ���� First Greece, Then China: What Else Next?
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Lee Hsien LoongBangkok Bomb Budget 2015
Lee Wei LingBersih 4.0 SEA Games medal tally
QZ8501Nepal Earthquake Workers’ Party
MERSCharlie Hebdo Medishield Life
Amos YeeGreece Prime Minister’s Office
iPhone 6SISIS SG 50
WhatsApp WebParis GE 2015
SEA GamesSabah Earthquake Sabah Earthquake
Lee Kuan YewQZ8501 SEA Games
PSI SingaporeMERS PSI Singapore
Rank SG SearchesGlobal News SG News
Source: Google (Annual Data)
Looking Back: Top “Concerns” / “Interests” of 2015
UOB Global Economics & Markets Research 8
Asset Class Performance in 2015
Source: Bloomberg (Daily Data)
10 9 9
75
2
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-13-14-14
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CH
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CN
Y
INR
PH
P
VN
D
GB
P
SG
D
KR
W
TH
B
EU
R
IDR
AU
D
NZ
D
MY
R
% chg
2015
2016 to date
Equities Sovereign Credit Commodities FX
UOB Global Economics & Markets Research 9
Shanghai Composite Index
0
20
40
60
80
100
120
-250 -200 -150 -100 -50 0 50 100 150 200 250 300 350 400 450 500 550 600
Index
CurrentShanghai Composite
-44%
12th Jun 2015 =
2800
5166
153%
Jun 2014
UOB Global Economics & Markets Research 10
History doesn’t repeat itself,
… but it does RHYME.Mark Twain
UOB Global Economics & Markets Research 11
Shanghai Composite Index (Actual vs Forecast)
0
20
40
60
80
100
120
-250 -200 -150 -100 -50 0 50 100 150 200 250 300 350 400 450 500 550 600
Index
GFC
Current
14th May 2016
16th Oct 2007
Forecast
Actual
-72%
-44%153%
Jun 2014
12th Jun 2015 =
2800
5166
UOB Global Economics & Markets Research 12
0
20
40
60
80
100
120
0 100 200 300 400 500 600
Index MSCI Asia Pac Ex Japan
GFC
Current9th Aug 2016
0
20
40
60
80
100
120
0 100 200 300 400 500 600
Index Straits Times Index
GFC
Current9th Aug 2016
0
20
40
60
80
100
120
0 100 200 300 400 500 600
Index Shanghai Composite Index
GFC
Current0
20
40
60
80
100
120
0 100 200 300 400 500 600
Index S&P 500 Index
GFC
Current 9th Aug 2016
What Lies Ahead?
UOB Global Economics & Markets Research
2010 Economic Strategies Committee
14
1. Exploring new growth areas;
2. Anchoring global companies in Singapore while nurturing home-grown
enterprises;
3. Growing human and knowledge capital;
4. Creating high-value jobs for Singaporeans;
5. Maximising finite resources such as land and energy
� �
UOB Global Economics & Markets Research
2016 “The Future Economy” Committee
15
Future growth industries and markets. Identify and design growth strategies for priority clusters in
Singapore, and to enable companies to seize opportunities in the global marketplace.
Corporate capabilities and innovation. Recommend strategies to enable companies and industry
clusters to develop innovative capacities, and use technology as well as new business models and
partnerships to create value.
Jobs and skills. Assess the impact of demographics and technology on the labour force, and
recommend strategies to create and re-design jobs, and to equip Singaporeans with the skillsets
needed for the future.
Urban development and infrastructure. Recommend strategies to enhance our infrastructure and
develop sustainable urban spaces, so as to create an outstanding living environment for our people
and reinforce economic advantage.
Connectivity. Study modern connectivity and flows in the future global economy and recommend
how Singapore can continue to be a hub that brings value to Asia and the world.
UOB Global Economics & Markets Research
Comparing The 2016 Goals With 2010’s
16
1. Exploring new growth areas;
2. Anchoring global companies in Singapore
while nurturing home-grown enterprises;
3. Growing human and knowledge capital;
4. Creating high-value jobs for Singaporeans;
5. Maximising finite resources such as land
and energy
1. Future growth industries and markets.
2. Corporate capabilities and innovation.
3. Jobs and skills.
4. Urban development and infrastructure.
5.Connectivity.
2010 2016
“Old Song, New Singer”
17
Will The “Miracle” Continue?
BONUS
UOB Global Economics & Markets Research
UOB ASEAN Research
18
Why Asia?
Why ASEAN?
Macroeconomic Trends
Key Stats
Demographics
Middle Income
Top ASEAN Cities
External Trade
Intra-ASEAN
Extra-ASEAN
Special Focus: The Economic Complexity of
ASEAN Economies
Investments
FDI By Countries
Within ASEAN
Outside ASEAN
FDI By Industries
AEC
Compare With Other Blocs
Potential Benefits
By Economies
By Sectors
Progress Report
SG SME’s Internationalisation Trends
UOB Global Economics & Markets Research 19
This Is The Century For Asia
Evolution of the Earth’s Economic Centre Of Gravity, AD1 to AD2025
Source: McKinsey Global Institute, June 2012, Urban World: Cities and the rise of the consuming class
140km/year
UOB Global Economics & Markets Research
Asia’s Increasing Share of Global GDP
20
Nominal GDP 2014 Nominal GDP 2020
Source: IMF, UOB Global Economics & Markets Research
EU-28
24%
ROW
8%
Japan
6%
China
13%India
3%
Asia ex-CIJ
7%
MENA
4%
LatAm
8%
CIS
3%
US
23%
SSA
2% EU-28
21%
ROW
7%
Japan
5%
China
16%
India
4%
Asia ex-CIJ
8%
MENA
4%
LatAm
7%
SSA
3%
US
23%
CIS
2%
Asia % of Global: 23% Asia % of Global: 28%
US$77tn US$98tn
UOB Global Economics & Markets Research
Growing Population and Consumer Affluence
21
Population Change by Region, 2010-2020 Growing Middle Class
0
1,000
2,000
3,000
4,000
5,000
2009 2020 2030
Asia Pacific LatAm MENA
South Africa Europe North America
340mn
-50 0 50 100 150 200 250 300 350
Japan
CIS
EU-27
ROW
US
LatAm
MENA
South Africa
Asia ex-Japan
525mn 3,228mn
Source: UN, OECD, The Brookings Institution, UOB Global Economics & Markets Research
1,740mn
UOB Global Economics & Markets Research 22
China & ASEAN Amongst World’s Top Economies
Nominal GDP Trend (2001-2030)
Source: IMF, World Bank, UOB Global Economics & Markets Research
0
5,000
10,000
15,000
20,000
25,000
30,000
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029
Eurozone
US
China
ASEAN
JapanUK
2018 2025
US$ Billions
2010
UOB Global Economics & Markets Research 23
Source: ASEAN Secretariat
UOB Global Economics & Markets Research 24
Since 2000, ASEAN Saw Rapid & Stable Growth
Selected Key Economic Indicators Comparing ASEAN & ROW
Source: IHS; World Economic Outlook (IMF), McKinsey Global Institute
UOB Global Economics & Markets Research
Key Macroeconomic & Development Statistics (2013)
25
ASEAN
Countries
Land Area
(sq km)
Population
(000)
Urban
Population (%)
GDP Current Market
Prices (US$mn)
GDP Per
Capita
(US$)
Internet Subscriber
Per 1000 Persons
International
Air Passenger
Traffic (000)
Brunei 5,769 406 78.7* 16,117 39,679 130 2,017**
Cambodia 181,035 14,963 21.4 15,511 1,037 49* 3,997*
Indonesia 1,860,360 248,818 50.1 860,850 3,460 163 10,943
Lao 236,800 6,644 36.0* 10,283 1,548 108* 729
Malaysia 330,290 29,948 72.7* 312,072 10,420 226 38,032
Myanmar 676,577 61,568 30.8 54,661 888 41 2,652
Philippines 300,000 99,385 49.1* 269,024 2,707 64* 16,421*
Singapore 716 5,399 100.0 297,941 55,182 720 52,775
Thailand 513,120 68,251 33.9* 387,574 5,679 27* 54,005
Viet Nam 330,972 98,709 32.2 171,219 1,909 58 13,203*
* 2012 figure
** 2011 figure
Source: ASEAN Statistics Leaflet – Selected Key Indicators 2014
UOB Global Economics & Markets Research 26
Relatively More Favourable Economic Conditions
Real GDP and Inflation Rates (2011-2015)
y = 0.4969x + 1.3962
R² = 0.3019
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
-2.0 0.0 2.0 4.0 6.0 8.0
Inflation %
Real GDP %
Source: IMF, World Bank, UOB Global Economics & Markets Research
MyanmarLao
India
Cambodia
ChinaPhilippines
Vietnam
Indonesia
Malaysia
Thailand
Singapore
Korea
Australia
NZ
Taiwan
HK
US
UK
Canada
Switzerland
Germany
Japan
Belgium
Spain/France
Russia
Finland
Italy
Brunei
UOB Global Economics & Markets Research 27
Relatively More Favourable Economic Conditions
Real GDP and Inflation Rates (2015-2020)
y = 0.4046x + 1.0684
R² = 0.292
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
-2.0 0.0 2.0 4.0 6.0 8.0
Inflation %
Real GDP %
Source: IMF, World Bank, UOB Global Economics & Markets Research
Myanmar
Lao
India
Cambodia
China
Philippines
VietnamIndonesia
Malaysia
Thailand
Singapore
KoreaAustralia
NZ
Taiwan
HK
US
UK
Canada
Switzerland
GermanyJapanBelgium
Spain
Russia
Finland
Italy
Brunei
France
28
Did the Rise of China as a
Manufacturing Powerhouse
Cannibalise Exports from other
Countries (eg: ASEAN)?
UOB Global Economics & Markets Research 29
Source: Christopher Napoli, “China’s Economic Rise: Implications for ASEAN Trade Flows”, Journal of Southeast Asian Economics Vol. 31, No. 3 (2014). Pp. 345-
60
UOB Global Economics & Markets Research 30
ASEAN Exported Less To US & EU Since 1998, But A lot More To China
Share of ASEAN Total Exports To US, EU, and China+HK (1981 – 2015)
23.1%
9.5%
18.9%
9.3%
9.5%
21.5%
0%
5%
10%
15%
20%
25%
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
% Share of Total
United StatesEuropean UnionChina+HK
Source: IMF Data, UOB Global Economics & Markets Research
The Dragon Awakes
31
But Can The China Growth Engine
Continue To Roar, Or Slow To A Sputter?
UOB Global Economics & Markets Research 32
Slower Growth This Decade… And Longer?
China’s Real GDP Growth (1978 – 2014)
Source: CEIC,
% y/y
UOB Global Economics & Markets Research 33
Manufacturing Powerhouse Slows Down
China’s Industrial Value Added YTD)
Mar1999
Mar2001
Mar2003
Mar2005
Mar2007
Mar2009
Mar2011
Mar2013 2015
Mar
20 20
18 18
16 16
14 14
12 12
10 10
8 8
6 6
%y/y change, 12-month MA
Jan 1995 - Dec 2013monthly average = 13%
Source: CEIC, UOB Global Economics & Markets Research
“新新新新经经经经济济济济”指数指数指数指数医药消费汽车出口清洁能源电力生产通信设备和电脑生产民营企业产值
“旧经济旧经济旧经济旧经济”指指指指数数数数房地产投资纺织及织物出口热电力生产有色金属矿石生产国有企业产值
经济转型经济转型经济转型经济转型
UOB Global Economics & Markets Research 35
新经济行业在支持新经济行业在支持新经济行业在支持新经济行业在支持7%的经济增长的经济增长的经济增长的经济增长
实际国内生产总值实际国内生产总值实际国内生产总值实际国内生产总值, 经济活动指数经济活动指数经济活动指数经济活动指数(新新新新/旧旧旧旧)
7.56
11.25
1.72
0
2
4
6
8
10
12
14
16
0
5
10
15
20
25
30
35
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
GDP % y/y% y/y
Real Activity Index (实体经济活动指数)
New Economy (新经济指数)
Old Economy (旧经济指数)
Real GDP (实际国内生产总值)
来源: 彭博社 (按月数据)
UOB Global Economics & Markets Research 36
UOB Global Economics & Markets Research 37
1950 544m 984m1980 2010 1360m
2040 1435m 2070 1241m 2100 1086m
UOB Global Economics & Markets Research 39
Rising Labour Costs Across China’s Cities
Asian Labour Costs (Factory Workers’ Wages In Emerging Asia)
Source: Bloomberg Article (China Is Set To Lose Manufacturing Crown, 29 Apr 2015)
Monthly Base Salary US$
UOB Global Economics & Markets Research 40
Demographics of China and ASEAN
Maximum Turning Points in Population
0.4
0.6
0.8
1.0
1.2
1.4
1.6
2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
Bil PaxChina
ASEAN
Population Starts to Shrink
2031
2064
Source: CEIC, UN Census Bureau (Annual Data)
UOB Global Economics & Markets Research 41
Source: ASEAN Secretariat, UN
UOB Global Economics & Markets Research 42
Strong Demographics Is On ASEAN’s Side
% of Population >65yo and <15yo (2014)
3.8 4.3 4.5 5 5.3 5.5 5.7 5.8 6.48.5 9.6 10.1
11.812.7
14.3 15 15.1
25.8
34.833.3 33.7
32.3
26.428.8
24.3
28.526.1
13.4
17.119
14.3 14.1
20
11.3
18
13.2
0
5
10
15
20
25
30
35
40
% of population>65yo <15yo
Source: CEIC, UN Census Bureau (Annual Data)
UOB Global Economics & Markets Research 43
Economic Development = Higher Dependency Ratios?
Scatterplot of <15yo and >65yo in Selected Countries (2014)
y = -11.89ln(x) + 49.257
R² = 0.8297
0
5
10
15
20
25
30
35
40
45
50
0 5 10 15 20 25 30
% <15yo
% >65yo
SG JP
Nigeria
HK
The Price of Economic Development?
Europe
AUUS
SKTW
SG-resid
Israel
TH
CN
IDVN
INMY
PHLaos
CAN
Myanmar
Source: CEIC, UN Census Bureau (Annual Data)
UOB Global Economics & Markets Research 44
Economic Development = Higher Dependency Ratios?
Scatterplot of <15yo and >65yo For 65 Countries (1993-2014),
Source: CEIC, UN Census Bureau (Annual Data)
y = -13.63ln(x) + 54.08R² = 0.8697
0
5
10
15
20
25
30
35
40
45
50
0 5 10 15 20 25 30
% <15yo
% >65yo
The Price of Economic Development?
UOB Global Economics & Markets Research 45
ASEAN Set To Benefit From Strong Demographic Profile
Demographic ‘Sweet Spot’
Source: UN Population to 2030, UN World Population Prospects, UOB Global Economics & Markets Research
Note: Defined as the period when the population under 15 years of age drops below 30% and the population over 65 is less than 15%
Lao
Philippines
Cambodia
Malaysia
Indonesia
Vietnam
Myanmar
Brunei
Thailand
China
South Korea
Singapore
Hong Kong
Japan
1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080
2015
UOB Global Economics & Markets Research 46
47
“Rural-Urban Migration”. So What?
UOB Global Economics & Markets Research 48
Quiz Time…
Relationship Between Income & Urbanisation
4
5
6
7
8
9
10
11
12
13
0 10 20 30 40 50 60 70 80 90 100
Income
% Urbanisation
UOB Global Economics & Markets Research 49
Urbanisation Is Positively Correlated With Rising Prosperity
Correlation Of GDP Per Capita & % Urbanisation 1980 to 2020 (n = 11)
Source: United Nations World Population Division, UOB Global Economics & Markets Research Est
4
5
6
7
8
9
10
11
12
13
0 10 20 30 40 50 60 70 80 90 100
Log of Income
% Urbanisation
China Vietnam
Thailand Korea
Indonesia Malaysia
Myanmar India
United States United Kingdom
Singapore
Korea
SingaporeU.K.
U.S.
MY
VN
CN
THID
Myanmar
UOB Global Economics & Markets Research 50
Urbanisation Is Positively Correlated With Rising Prosperity
Correlation Of GDP Per Capita & % Urbanisation 1980 to 2020 (n = 135)
Source: United Nations World Population Division, UOB Global Economics & Markets Research Est
y = 0.0501x + 5.3512
R² = 0.5909
4
5
6
7
8
9
10
11
12
13
0 10 20 30 40 50 60 70 80 90 100
Log of Income
% Urbanisation
China Vietnam
Thailand Korea
Indonesia Malaysia
Myanmar India
United States United Kingdom
SingaporeTrinidad & Tobago
UOB Global Economics & Markets Research 51
Increase Urbanisation���� Increase Agricultural Value
Relationship Of Urbanisation & Agricultural Value
Source: IHS, World Population Prospects (UN), McKinsey Global Institute analysis
NOTE: First data point per country, 1980; last data point per country, estimated for 2015.
UOB Global Economics & Markets Research 52
90 Million More People Moving Into ASEAN Cities
Share of Country Population Living In Cities Of More Than 200k Inhabitants
%
Source: McKinsey Global Institute
54% of
UOB Global Economics & Markets Research 53
“Consumer Class” ASEAN Households To Double By 2030
Number Of “Consumer Class” ASEAN Households
Source: McKinsey Global Institute Cityscope Database
Note 1: Defined as households with more than $7,500 in annual income (in 2005 purchasing power parity terms). This is the income level at which
households begin to make significant discretionary purchases;
Note 2: Brunei not shown on chart as number of consuming class households in 2030 is only ~0.1 million.
Million
↑118%
↑54%
↑109%
↑110%
↑200%
↑50%
↑200%
↑100%
↑50%
↑101%
UOB Global Economics & Markets Research 54
Largest Growth Opportunities In Mid-Sized Cities
Segmentation Of GDP Growth By Size Of ASEAN Cities
Source: McKinsey Global Institute Cityscope Database
Note 1: Includes cities with fewer than 200,000 inhabitants.
UOB Global Economics & Markets Research 55
Largest ASEAN Cities By 2030
Population By 2030 - Tier 1 (Pop > 5m) ASEAN Cities (n = 8)
Source: UN Population to 2030, UN World Population Prospects
0
2
4
6
8
10
12
14
16
18
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Mil Pax
Manila (Philippines)
Jakarta (Indonesia)
Bangkok (Thailand)
Ho Chi Minh City (Viet Nam)
Kuala Lumpur (Malaysia)
Yangon (Myanmar)
Singapore (Singapore)
Hà Noi (Viet Nam)
1.7%
2.0%
1.5%
2.3%
2.2%
2.1%
1.1%
2.8%
CAGR (2015-2030)
UOB Global Economics & Markets Research 56
Tier 2 ASEAN Cities By 2030
Population By 2030 - Tier 2 (2m < Pop < 5m) ASEAN Cities (n = 9)
Source: UN Population to 2030, UN World Population Prospects
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Mil Pax
Surabaya (Indonesia)
Bandung (Indonesia)
Samut Prakan (Thailand)
Medan (Indonesia)
Phnum Pénh (Cambodia)
Batam (Indonesia)
Davao City (Philippines)
Semarang (Indonesia)
Makassar (Indonesia)
1.9%
2.0%
3.7%
2.0%
2.7%
3.9%
2.1%
2.0%
2.3%
CAGR (2015-2030)
UOB Global Economics & Markets Research 57
Tier 3 ASEAN Cities By 2030
Population By 2030 - Tier 3A (0.75m < Pop < 2m) ASEAN Cities (n = 10)
Source: UN Population to 2030, UN World Population Prospects
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Mil Pax
Can Tho (Viet Nam)
Palembang (Indonesia)
Denpasar (Indonesia)
Vientiane (Laos)
Pekan Baru (Indonesia)
Mandalay (Myanmar)
Hai Phòng (Viet Nam)
Bogor (Indonesia)
Nay Pyi Taw (Myanmar)
Da Nang (Viet Nam)
CAGR (2015-2030)
3.3%
1.8%
3.6%
4.0%
2.9%
2.4%
2.5%
2.4%
2.1%
2.4%
UOB Global Economics & Markets Research 58
Key Cities In ASEAN That Will Drive Economic Growth
GDP Growth Map Of ASEAN
Source: McKinsey Global Institute Cityscope database; IHS; local statistics offices; McKinsey Global Institute analysis
1 Includes cities with more than 200,000 inhabitants.
59
Younger = YES
“Better, Faster?”
Cheaper = MAYBE
UOB Global Economics & Markets Research 60
Although Cheaper Than China, ASEAN Not As Productive
Average Daily Wage, Productivity, Output in 2012
Source: McKinsey Global Institute analysis
Note:: Brunei, Cambodia, Laos, and Myanmar not included due to lack of available data. Analysis assumes Monday-Friday
work and 4 weeks off work per year for all countries (combination of leave allowances and public holidays).
61
YOUR
opportunities!
Infrastructure Challenges In ASEAN
UOB Global Economics & Markets Research
Asia Lags Behind OECD and Latin American Economies In Infrastructure Coverage
62
Source: IE Singapore (IE Insights Vol.18)
CountryRoads (km) Rail (km) Phone (number) Electrification Clean Water
Per 1,000 people Percentage
ASEAN 10.5 0.27 3.5 71.7 86.4
Asia 211.7 5.21 13.9 99.8 99.6
Latin America 14.3 2.48 6.1 92.7 91.4
Africa n.a. 0.95 1.4 28.5 58.4
UOB Global Economics & Markets Research 63
Gaps In Supply & Quality Of Infrastructure In ASEAN
Infrastructure Gaps
Myanmar
Vietnam
Thailand
Singapore
Philippines
Malaysia
Indonesia
China
United States
Germany
Japan
Road Density
Road km per 100 sq km
Paved Unpaved
32
96
99
100
70
100
76
100
100
100
100
Access to Electricity
%
0.8
0.8
0.8
na
0.3
0.6
0.3
0.9
2.5
12.0
7.5
Rail Density
Rail km per 100 sq km
Source: World Factbook (CIA). World Development Indicators (World Bank) International Renewable Energy Agency, IHS Global
Competitiveness Report (2013-14), UOB Global Economics & Markets Research
1. Split of paved and unpaved road unavailable for Germany, Singapore, Thailand and Myanmar
332.0
185.0
71.9
44.0
27.4
43.9
71.5
498.5
35.2
63.0
5.3
3.9
3.6
6.1
4.5
3.2
2.4
5.6
3.7
2.3
na
2.4
3.0
1.8
5.0
4.3
4.2
6.7
5.1
4.2
2.8
5.7
UOB Global Economics & Markets Research 64
Most ASEAN Countries Inf. Stock Below Global Average
Infrastructure Stocks % Of GDP (2012)
Source: International Transport Forum, Global Water Intelligence (IHS), McKinsey Global Institute
1 Estimated based on historical expenditure and using the perpetual inventory method. 2 Transport infrastructure stock for Indonesia is understated, as
expenditure for rail, ports, and airports is not available. 3 Based on a study of Canada, China, Germany, India, Italy, Poland, South Africa, Spain, United
Kingdom, and United States.
3119 19 18 13
6
25
14
9 104 11
6
20
10
10 13
7 7
4
13
17
13 9
18 12
12
13
0
10
20
30
40
50
60
70
80
Singapore Malaysia Thailand Vietnam Philippines Indonesia GlobalBenchmark
% of GDP
Water Telecom
Power Transport
72
51 5147
43
28
71
Ave: 49
UOB Global Economics & Markets Research 65
Infrastructure Spending To Increase Further
Expected Annual Infrastructure Spending
US$ bn, 2013 Prices
Source: International Transport Forum, Global Water Intelligence (IHS), McKinsey Global Institute
1 Includes total spending on transportation, power, water, and telecommunications infrastructure. Excludes real estate
investment.
2013-2030: US$3.4tr
UOB Global Economics & Markets Research 66
Many In ASEAN Living In Substandard Housing
% Of Population Living In Substandard Housing
% of total population
Source: UN World Population Policies Database, McKinsey Global Institute
1 Latest available data for Cambodia, Laos, and Myanmar is from 2005. 2 Population living in substandard housing divided by national average household
size. NOTE: Data unavailable for Malaysia and Singapore (it is also widely recognized that there are no slums in Singapore).
UOB Global Economics & Markets Research 67
Source: ASEAN Secretariat
UOB Global Economics & Markets Research 68
More Chinese Investments Into ASEAN
China’s Outward Direct Investment Into ASEAN 2003-2030
Source: CEIC, UOB Global Economics & Markets Research
14.4
31.2
63.4
185.0
0.6
2.2%
6.3%
8.0%
10.0%
13.8%
0
20
40
60
80
100
120
140
160
180
200
2003 2010 2013 2020 2030
0%
2%
4%
6%
8%
10%
12%
14%
16%
China: ODI to ASEAN (LHS)
China ODI to ASEAN as % share of ODI to Asia
US$ bn
69
Will AEC Bring More Trade Flows?
UOB Global Economics & Markets Research 70
UOB Global Economics & Markets Research 71
42.5% Of ASEAN Merchandise Exports Go To ASEAN & China (including Hong Kong)
Share of Exports To Trade Partners, 2014 (%)
Exports ASEANChina +
Hong KongIndia Japan South Korea Australia
European Union
United Kingdom
United States Canada
Brunei 14.0 0.8 6.5 42.3 17.2 8.2 0.1 0.1 0.2 0.1
Cambodia 13.6 4.6 0.1 5.7 0.0 0.8 32.8 8.5 28.3 0.0
Indonesia 11.2 16.2 7.2 13.7 6.3 3.0 8.8 0.8 9.4 0.7
Laos 57.5 27.4 0.0 2.8 0.3 1.5 8.8 2.1 0.9 0.3
Malaysia 25.1 23.5 3.0 9.8 3.7 3.3 7.8 1.6 9.2 0.8
Mynamar 42.4 26.1 12.6 6.9 4.5 0.2 2.4 0.7 0.3 0.1
Philippines 14.8 32.4 0.6 12.6 5.1 1.1 8.9 0.7 13.2 1.7
Singapore 29.4 23.6 2.7 2.8 4.0 5.3 8.3 0.9 6.9 0.5
Thailand 23.6 20.0 2.3 9.2 2.2 5.0 9.2 1.5 11.3 1.2
Vietnam 13.6 15.2 2.0 9.8 5.0 2.8 19.5 2.8 18.0 1.6
Source: IMF
UOB Global Economics & Markets Research 72
Opportunities in Asia – Trade to be Increasingly Intra-Regional
ASEAN Total Merchandise Exports By Destination (% of Total)
Source: http://www.asean.org/resources/2012-02-10-08-47-55/asean-statistics; IMF, ASEAN investment report 2011, UOB Global Economics &
Markets Research estimates and forecasts
61%33%
UOB Global Economics & Markets Research 73
Lots More Room For Intra-Regional Trade In ASEAN After AEC
Intra- & Extra- Regional Trade Across Trading Blocs
Source: Comtrade; McKinsey Global Institute analysis
Share of Total Goods Trade, %
UOB Global Economics & Markets Research 74
AEC’s Aspirations Will Be Different From Other Blocs
Comparing AEC & Other Economic Cooperation Agreements
Source: McKinsey Global Institute analysis
UOB Global Economics & Markets Research
ASEAN’s Landscape Dominated By MNCs & National Champions, But Few Regional Champions
75
Global company with
ASEAN footprint
ASEAN company with
significant1 multi-cty
footprint
Strong presence in a single ASEAN
cty
Total
Packaged Food &
Beverages
40 15 96 441
• Nestle
• Artisanal
• Royal
• FrieslandCampina
• Unilever Group
• Groupe Danone
• JG Summit Hldgs
• San Miguel
• CP Group
• Indofood Sukses Makmur (ID)
• Vietnam Diary Pdts (VN)
• Monde Nissin (PH)
• Masan Group (VN)
• Mayora Indah (ID)
Beauty & Personal
Care
25 1 15 177
• Unilever Group
• Procter & Gamble
• L’Oreal Groupe
• Colgate-Palmolive
• Johnson & Johnson
• Mandom • Better Way (TH)
• Giffarine Group of Cos (TH)
• SSUP Group (TH)
• Splash (PH)
• Kino Sentra Industrindo (ID)
Apparel &
Footwear
27 1 13 142
• Adidas Group
• Inditex Industria de
Diseno Textil
• Nike
• Bata Ltd
• Wacoal Hldgs
• Sing Tsu Fang • Suyen (PH)
• Golden ABC (PH)
• Padini Hldgs Berhad (MA)
• Jaspal (TH)
• Saha Pathana Inter-Hldg (TH)
MNCs Regional Champion National Champion
1: “Significant defined as > 10% of company’s retail value
2: Includes small companies with <$50m retail value (excld from MNCs/Regional/National champion analysis
3: Examples from packaged food & hot drink categories; excl soft drink & alcoholic beverage categories
Source: Euromonitor, McKinsey
No. of CompaniesAnalysis by retail value & geography, 2013
UOB Global Economics & Markets Research
ASEAN: Dominated By MNCs/National Champions, Few Regional Champions (contd’)
76
Source: Euromonitor; McKinsey Global Institute analysis
1 “Significant” defined as >10 percent of company's retail value. 2 Includes small companies with <$50 million retail value (excluded from
multinationals/regional champion/national champion analysis). 3 Examples drawn from packaged food and hot drink categories; excludes soft drink and
alcoholic beverage categories.
Global company with ASEAN footprint
ASEAN company with significant multi-cty
footprint
Strong presence in a single ASEAN cty
Total
Consumer Electronics
35 1 18 89
• Samsung• Nokia• LG• Apple• Sony
• Creative Technology • Metrotech Jaya Komunika (ID)• Cosmic Technologies (PH)• Hartono Istana Teknologi (ID)• Solid Group (PH)• Samart (TH)
Consumer Healthcare
27 3 15 298
• Amyway• Herbalife• GlaxoSmithKline• Nu Skin Enterprises
• United Laboratories• Citra Nusa Insan
Cemerlang
• Kalbe Farma (ID)• Temp Scan Pacific (ID)• Sido Muncul (ID)• Konimex Pharmaceutical Labs (ID)• Scotch Industrial (TH)
Analysis by retail value & geography, 2013
MNCs Regional Champion National Champion
UOB Global Economics & Markets Research 77
Impact of AEC Will Vary Across Sectors
Impact Of AEC By Sectors
Source: McKinsey Global Institute analysis
78
How Attractive Is It To Have An
ASEAN Strategy?
UOB Global Economics & Markets Research 79
SG-Strategy Generated 124% Total Returns
Cumulative Returns of Investment Strategies (Jan 2005 – Jul 2015)
Source: Bloomberg, UOB Global Economics & Markets Research Analysis
-50
0
50
100
150
200
250
300
350
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Rev >80% from SG N = 172
124%
Back-testing ParametersPeriod: Jun 2005 to Jun 2015
Frequency: Monthly
Weighting: Mkt Cap
Currency: SGD
UOB Global Economics & Markets Research 80
Twice The Returns For ASEAN-Strategy
Cumulative Returns of Investment Strategies (Jan 2005 – Jul 2015)
Source: Bloomberg, UOB Global Economics & Markets Research Analysis
-50
0
50
100
150
200
250
300
350
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Rev >80% from SG
Rev >80% from ASEAN (ex-SG)
N = 172
N = 44
124%
255%
Back-testing ParametersPeriod: Jun 2005 to Jun 2015
Frequency: Monthly
Weighting: Mkt Cap
Currency: SGD
UOB Global Economics & Markets Research
Summary Statistics On Both Investment Themes
81
Rev > 80% from SG Rev > 80% from ASEAN (ex-SG)
Return Statistics
Total Return (%) 123.87 255.18
Mean Return (%) 9.44 17.08
Min. Return (%) -8.07 -8.46
Max. Return (%) 5.51 8.45
Risk Statistics
Std. Deviation 11.75 21.09
Semi Variance 10.83 17.83
Skewness -0.59 0.24
Risk/Return Statistics
Sharpe Ratio 0.51 0.53
Source: Bloomberg, UOB Global Economics & Markets Research Analysis
N = 172 N = 44
82
So, Will Developed Countries Lose
Competitiveness?
UOB Global Economics & Markets Research 83
A Lot More Opportunities In Services Exports As Income Rises Across Asia
Asian Services Imports By Income Level
Source: IMF WEO Oct 2013, Eichengreen, B and Gupta, P (2009), “The Two Waves of Service Sector Growth”, NBER Working Paper No. 14968.
MY
UOB Global Economics & Markets Research 84
And Even In Manufacturing, You Can Specialise In Services!
Manufacturing Smile Curve
Source: Stan Shih, Former Chairman of Acer Group, 1992
Value-Added/Unit
Time
R&D
Design
Procurement
Production
LOGISTICS
Marketing
Sales/Services
DistributionCONCEPT
Global Competition Area Competition
85
The REAL BIG Challenge For
Corporates?
86
2011
2007
2003
2008
1999-2001
2010
2010
2009
2012
2012
2012
1989
1986
2011
2005
2009
1999
2009
2010
2008
2012
2000
2013
1994
2015
UOB Global Economics & Markets Research 87
You Just Need An App To Start A Biz!.. And A BIG One!
Valuation or Market Capitalisation (US$ bn)
Source: Bloomberg Analysis
UOB Global Economics & Markets Research
Structural Disruptions To (almost) All Industries
88
Industries % Share of GDP (2014)
Disrupters
Manufacturing 19%
Utilities 1%
Wholesale/Retail 18%
Tpt/Storage 8%
Accomd/Food 2%
Infocomms 4%
Finance/Insurance 12%
Biz Svcs 14%
Other Svcs 10%
* Not inside the list: Construction industry (5% share of GDP)
UOB Global Economics & Markets Research 89
UOB Global Economics & Markets Research 90
About The Speaker
Francis is an economist with United Overseas Bank’s Global Economics & Markets Research team and covers macroeconomic research
on Asia. He provides regular economics commentary on TV and is frequently quoted in the media. Before joining UOB in 2012, Francis
was an investment strategist at Phillip Capital where he used macroeconomics, business cycle theories, market timing and technical
analyses to develop a systematic top-down investment approach for discretionary portfolios. Prior to that, Francis served as an
Investment Manager in the wealth management arm of the Royal Bank of Scotland. His career also included stints as an economist at
the Ministry of Trade and Industry and the Singapore Tourism Board, where he specialised in Tourism Economics.
Francis obtained the Bachelor of Social Science (Honours) in Economics in 2002 and the Master of Social Science in Applied Economics
in 2003 from the National University of Singapore. Continuing his academic interests in the field of applied economics, Francis most
recently contributed a chapter titled "Tourism Demand in Singapore: Estimating Neighbourhood Effects" in the Handbook of Tourism
Economics published in 2013, and had just published a paper titled “Growth and Environmental Quality in Singapore: Is There Any
Trade-off?” in the “Ecological Indicators” journal in 2014.
Contact Details
Francis Tan
UOB Global Economics & Markets Research
Question & Answer Session
Thank you