presentation +emerging+markets+ +fad+or+new+reality
TRANSCRIPT
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DB ResearchDeutsche Bank Maria Laura Lanzeni
April 2012
DB ResearchDeutsche Bank
Emerging Markets:Fad or New Reality?
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DB ResearchDeutsche Bank Maria Laura Lanzeni
April 2012Deutsche Bank
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Agenda
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Medium- and long-term trends
Why emerging markets matter
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DB ResearchDeutsche Bank Maria Laura Lanzeni
April 2012Deutsche Bank
Global Outlook
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Economic forecast summary
GDP growth, % CPI inflation, %
2010 2011 2012F 2013F 2010 2011 2012F 2013F
G7 3.0 1.4 1.9 2.2 1.4 2.6 2.1 1.9
US 3.0 1.7 2.7 3.0 1.6 3.1 2.6 2.6
Japan 4.5 -0.7 2.8 1.5 -0.7 -0.3 -0.1 -0.2
Euroland 1.9 1.5 -0.2 0.8 1.6 2.7 2.5 1.7
EM Asia 9.5 7.4 7.1 7.5 4.6 6.1 4.1 4.3
China 10.3 9.2 8.6 8.6 3.3 5.4 3.1 3.5
India 9.9 7.3 7.3 8.0 9.6 9.5 6.4 6.8
EMEA 4.5 4.6 3.2 4.0 6.1 6.5 5.6 6.1
Russia 4.3 4.3 4.6 4.9 6.8 8.4 5.3 7.6
Latam 6.2 4.0 3.6 4.3 8.4 8.5 7.8 7.7
Brazil 7.5 2.7 3.2 5.0 5.9 6.5 5.0 5.7Advanced economies 2.8 1.4 1.7 2.1 1.5 2.6 2.2 1.9
EM economies 7.7 6.0 5.5 6.1 5.6 6.6 5.1 5.4
Global 5.1 3.5 3.5 3.9 3.4 4.5 3.6 3.5
Source: DB
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DB ResearchDeutsche Bank Maria Laura Lanzeni
April 2012Deutsche Bank
Emerging markets make up a large and growingshare of the world economy
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0
10
20
30
40
50
60
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
EM China
EM share in world GDP (at PPP)
%
Source: IMF; EM here includes the newly industrialised economies in Asia
39.5%
56.5%
5.6%
15.6%
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DB ResearchDeutsche Bank Maria Laura Lanzeni
April 2012Deutsche Bank
More importantly, they contribute significantlyto global growth
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-2
-1
0
1
2
3
4
5
6
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e
EM (incl. NIE) DM
World real GDP growth and EM contribution
Percentage points
Source: IMF, DB
EM:92%
EM:52%
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DB ResearchDeutsche Bank Maria Laura Lanzeni
April 2012Deutsche Bank
90
100
110
120
130
140
150
160
170
2007 2008 2009 2010 2011E 2012F 2013F
USA Euro area Emerging Asia China LatAm CEE EM
Source: Deutsche Bank
Real GDP, 2007=100
Cumulative growth since the crisis
70%
53%
37%
22%
15%
6.6%
0.0%
Global financial crisis accelerated the West-East shift
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DB ResearchDeutsche Bank Maria Laura Lanzeni
April 2012DB ResearchDeutsche Bank
Decoupling yes or no?
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-6
-4
-2
0
2
4
6
8
10
12
-6
-4
-2
0
2
4
6
8
10
12
2007 2008 2009 2010 2011E 2012F 2013F
Latin America Emerging Asia
Industrial countries CEE
Real GDP growth, % yoy
Source: Deutsche Bank
EMs will continue to outperform DMs
40
60
80
100
120
140
160
07 08 09 10 11 12
EM (right) World (left)
MSCI Indices, Jan 2, 2007=100
EM stocks sensitive to global shocks
Sources: Bloomberg, DB
Lehman GreeceSep 11sell-off
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DB ResearchDeutsche Bank Maria Laura Lanzeni
April 2012DB ResearchDeutsche Bank
Economic fundamentals had a dramatic improvement ...
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0
20
40
60
80
100
120
2000 2002 2004 2006 2008 2010 2012EM* DM
Public debt: A new world
General government gross debt, % of GDP
* Not including newly industrialised economiesSource: IMF
0.0
0.5
1.0
1.5
2.0
2.5
3.0
0
5
10
15
20
25
30
35
40
45
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
External debt (left) Interest payments on ext. debt (right)
External debt less of a burden
% of GDP, EM aggregate*
* Not including newly industrialised economiesSource: IMF
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DB ResearchDeutsche Bank Maria Laura Lanzeni
April 2012DB ResearchDeutsche Bank
which in turn led to a large country risk realignment
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0
200
400
600
800
1,000
1,200
PT IE ES IT BE TR PL FR RU ID BR CN DE
"Great risk shift" - Emergingmarkets trade inside several DMs5Y CDS spreads, bp
Source: Bloomberg as of Apr 23, 2012
10.00
12.00
14.00
16.00
18.00
20.00
22.00
2005 2006 2007 2008 2009 2010 2011
DM EM
Sovereign rating convergence
L/t foreign currency ratings, weighted averages
Source: DB based on the average of S&P, Moody's, Fitch ratings
AAA
BBB
A
BB
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DB ResearchDeutsche Bank Maria Laura Lanzeni
April 2012Deutsche Bank
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Agenda
2
1
Medium- and long-term trends
Why emerging markets matter
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DB ResearchDeutsche Bank Maria Laura Lanzeni
April 2012DB ResearchDeutsche Bank
Emerging markets: Poor but sexy
10
0
50
100
150
200
250
300
0
10,000
20,000
30,000
40,000
50,000
IN CN BR RU JP DE US
2011 level (left) % change vs 2000 (right)
Strong convergence under way
GDP per capita, USD (PPP)
Source: IMF
0
200
400
600
800
1,000
1,200
E. Asia S. Asia CEE LatinAmerica
MENA SSA
1990 2005
Lots of new consumers
Population living on USD 2 - USD 13 a day, million
Source: The Economist based on M. Ravallion
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DB ResearchDeutsche Bank Maria Laura Lanzeni
April 2012Deutsche Bank
Demographic developments very uneven for EMs
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0
10
20
30
40
50
2000 2005 2010 2015 2020 2025 2030
Brazil Russia India China Germany
India is the demographic winner
Old-age dependency ratio*, %
* Ratio of population aged 65+ to population aged 15-64. Projections correspond to the medium variantSource: UN
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DB ResearchDeutsche Bank Maria Laura Lanzeni
April 2012Deutsche Bank
Growth rates of urban agglomerations, 1970-2011
Urbanisation: The past
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Source: UN
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DB ResearchDeutsche Bank Maria Laura Lanzeni
April 2012Deutsche Bank
Growth rates of urban agglomerations, 2011-2025
Urbanisation: The future
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Source: UN
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DB ResearchDeutsche Bank Maria Laura Lanzeni
April 2012DB ResearchDeutsche Bank
The new corporate world
Emerging market companies: Climbing the ranks
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particularly in banking30 largest banks worldwide, % of total market cap.
US25.0
UK13.1
Other DM25.9
China
26.4
Brazil7.1
Russia2.6
US39.8
UK12.5
Other DM
47.7
Sources: IMF, BanksDaily.com, DB
2006
Ten largest companies in the world by market cap.
Global rank Company Country
2011 2010
1 2 Exxon Mobil US
2 1 PetroChina China
3 5 Apple US
4 4 ICBC China
5 1 Petrobras Brazil
6 6 BHP Billiton Australia/UK
7 11 CCB China
8 19 Royal Dutch Shell UK
9 25 Chevron US
10 3 Microsoft US
Source: FT
2010
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DB ResearchDeutsche Bank Maria Laura Lanzeni
April 2012Deutsche Bank
Why not industrial countries yet?
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0
20
40
6080
100
120
140
160
DE JP US KR SA TR ZA BR CN IN MX ID RU
Corruption perceptions index 2011* Ease of Doing Business 2012**
Low quality of institutions in many emerging markets
Ranking out of 183 countries
* Indicates the perceived level of public sector corruption. A country's rank indicates its position relative to the other countries in the index.** A high ranking (i.e. lower number) means the regulatory environment is more conducive to the starting and operation of a local firm.
Source: Transparency International, World Bank
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DB ResearchDeutsche Bank Maria Laura Lanzeni
April 2012Deutsche Bank
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