Brazil, Russia, India, China
Even as of 2001, China's GDP was higher than Italy already. Fast forward 12 years, we see the sputtering economy of Italy, France and in some sense U.K while U.S.A and Japan has crazy ballooning debts. Even then China continues to muscle on.
First up
Brazil
Why an investment there makes sense?
Stable government under Rousef, proximity to a burgeoning latino market that holds much potential to wealth.
Why it does not.
'After making a big push into the South
American giant in search of raw materials such as iron ore, as well as a
promising market for their consumer goods, Chinese executives have grown
frustrated with stagnant economic growth, heavy costs and what they see as a
political and popular backlash against their presence.' - Reuters (Link)
Companies with Brazilian exposure
Commodity
supply chain managers/owners - Wilmar intl/ Olam Holdings / Noble group
Shipbuilders/OSV/Oilrig
builders - Keppel Corp/ Sembmarine/ Vard Holdings
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Russia
Key
statistics
Real GDP growth (2012): + 3.4%
GDP per sector (2012): Agriculture: 4.4% /
Industry: 37.6% / Services: 58.0%
Main exports: Oil and gas, wood and wood products,
metals, chemicals, weapons and military equipment
Main export partners (2011): Netherlands 12.2%,
China 6.4%, Italy 5.6%, Germany 4.6%, Poland 4.2%
Why an investment
makes sense?
With a stable government in the form of president Vlamir Putin
(elected till 2018) and prime minister Dmitry Medvedev. Putin is one solid
president who has strong standing with his people (amid some small rebellions
and unhappiness), I once recalled a newspaper article where he scolded a
billonaire tycoon and forced him to sign some contact 'case in point was that
putin was making things right and preventing the tycoon from
abusing/mistreating his people'.
Natural Resources - Russia accounts for some 20% of the
world’s gas reserves, 18% of the world’s coal reserves and 5% of the world’s
oil reserves. Together with its hydrocarbon deposits, Russia is also home to
one of the world’s leading mineral industries. From bauxite to iron ore, gold
to platinum and a lot of mineral types in between, Russia ranks amongst the
world’s top 10 in terms of both production and reserves.For example, Russia
accounts for nearly 25% of the world’s diamond production by value. (KPMG -
Russia) Special play - Gazprom
Consumer market - the Russian middle-class is expected to
more than triple in the next eight years, rising from approximately 20m in 2011
to nearly 70m by 2020. As such, Russia is expected to become the largest consumer
market in Europe by 2020, whilst its per capita GDP is expected to
triple
to USD 35,000. To illustrate, the Russian banking sector has been one of the
fastest growing of the leading emerging markets over recent years, with a 26%
CAGR over 2005-2012. (Source - BOAML, Russia 2020). Special
play - Sberbank
Domestic fixed investments - With the winter olympics being held in 2014, as well as
2018 world cup and improving rail systems and Moscow ambition to be an
international financial centre, increasingly more investments would be pumped
into such areas.
Silicon Valley? At a planned 400 hectares, Skolkovo will consist of a
university and techno park aimed at attracting tech start-ups and foreign
investors with government grants. US companies such as Cisco, IBM and Microsoft
have already committed to the project. As a special economic zone,
foreign companies will get tax-breaks and special treatment when it comes to
visas and imports. With construction well under way, the government has
pledged USD 4.2bln for the project. (Source - KPMG)
Jim Rogers - Famed investor Jim
Rogers suggests the Russian market may be undervalued and could present
significant opportunity for investors. Rogers stated that after a recent visit
to Russia he came away impressed with progress influenced by the actions of
President Vladmir Putin. (Source - Emerging Money – by Steven Orlowski)
What are the risks?
1.
Volatility of oil and gas prices/ commodities
2.
Institutional framework for businesses
3.
Dynamics of social cohesion - egalitarian society and gini coefficients are
things to look at. Citizens buy-in for long term investments are a necessity.
India
A culture strongly embedded with religious hierarchy that ensures that one stays within their own castes. Although the castes systems have been abolished, the underlying tone and adherence to one's roots make it hard for meritocracy to thrive in this country (at least not for a while).
Where to invest?
Specific themes for India would be the growing demographics, rise of middle class (think property, financial firms and luxury items).
Why not?
A country filled with bureaucracy and notably the largest democracy in the world, democracy in its purest form is a style that encourages too much variety of opinions with no proper decision making.
India was put to the test with their hosting of the commonwealth games in 2010 - Check Out The Worst-Planned International Sports Event Ever. Its not a pretty sight.
A friend who travelled to india also told me that besides skyscrapers there are slums. A report stated that citizens have more handphones in the country than toilets. The whole system and infrastructure of the country is messy. In addition to the horror cases of rape/molest of foreign tourists or even locals.
Personal story - In 2010, I thought that BK Modi, an illustrious investor from India who first came to Singapore and bought MediaRing/Spice i2i (now known as Si2i). I seriously thought he was a serious entrepreneur with the track record. The company had two rights issues which failed terribly. I should have listened to my own voice of rationality that when BK Modi said that a $10m shortfall in valuation in one of the mobile companies he was acquiring didn't matter. If he says 10m doesn't matter, he is not taking the business seriously, I should have dumped all my stock then. In the end, I exited with a $3000 lost (a hefty 80% capital destruction). A seriously big amount for a university student then. It straighten all my thoughts and changed my perspective that I needed to evaluate my portfolio wisely. Today the stock languishes at 0.008 and nobody even cares about this cash burn company.
Outlook - I wouldn't touch any Indian investments with a 10 foot pole. But some good companies out there include
1. JM Financial (New chairman designate - Former Citibank CEO)
2. Tata Group
3. IDBI bank
China
The best place to invest for the last 20 years. Does the allure still shine?
Jim Rogers mentioned that this century is the time for the Chinese - China to shine. Here's my thoughts on why he is right.
1. The country's population of 1.1bln gives plenty of opportunity for pretty much any industry. Think property, healthcare, retail, F&B.
2. The country has many many brilliant individuals who are returning back to the country (like a seaturtle returning to its nesting ground) - think corporate titans, scientists, engineers.
3. The country has been growing at 7-8++% for many years. It shows no signs of slowing down. Corporate billionaires are being minted almost yearly.
4. One word. Alibaba. The amazon, ebay, paypal and credit line all in one. Amazing.
Why not?
1. The country's ascension to power has left it choking on industrial smog that pollutes and threatens their own livelihood.
2. The one child policy has left a rather slanted population trend of Aging population and overly spoilt single childs (mostly males)
3. Property bubble has been growing and growing. Leaving many ghost towns and capital expenditure just wasted around the corner.
4. Following up point 3, many of the big 4 chinese banks are financing such assets. In addition, they have huge exposure to other forms of debt that the shadow banking system i threatening to create a calamity.
Themes and local SG players
- Yanlord (Pure high end civillian real estate + shopping malls)
- Capitaland and Keppel Land (Chinese property and real estate + shopping malls)
- Capitamall Asia (Chinese retail mall play)
- Mapletree GCC (A small play on chinese office/commercial property)
- K1 Ventures (a small but strong stake in ChinaAuto - the biggest distributor of automotive in china)
- Yangzijiang (Chinese shipyard and ship builder + oil rig building)
- Noble Group (Chinese State investment owns a stake in it) - commodities an interesting play
- Wilmar - Palm oil is highly sought after but price is controlled in China.
Not withstanding a recession/ property bubble bursting (which the authorities are taking prudent steps to control), Liew Mun Leong (Capitaland former CEO) did mention a conversation with Jamie Dimon before - Where is the best place to be building and selling property?
The answer: China. The growing middle class, the creation of the super-rich from tech savvy entrepreneurs and the very fact that increasingly, urbanization of the outskirts of china leaves much room for imagination. That China is a monster of an investment dream as the next global superpower.
Jim Rogers mentioned that this century is the time for the Chinese - China to shine. Here's my thoughts on why he is right.
1. The country's population of 1.1bln gives plenty of opportunity for pretty much any industry. Think property, healthcare, retail, F&B.
2. The country has many many brilliant individuals who are returning back to the country (like a seaturtle returning to its nesting ground) - think corporate titans, scientists, engineers.
3. The country has been growing at 7-8++% for many years. It shows no signs of slowing down. Corporate billionaires are being minted almost yearly.
4. One word. Alibaba. The amazon, ebay, paypal and credit line all in one. Amazing.
Why not?
1. The country's ascension to power has left it choking on industrial smog that pollutes and threatens their own livelihood.
2. The one child policy has left a rather slanted population trend of Aging population and overly spoilt single childs (mostly males)
3. Property bubble has been growing and growing. Leaving many ghost towns and capital expenditure just wasted around the corner.
4. Following up point 3, many of the big 4 chinese banks are financing such assets. In addition, they have huge exposure to other forms of debt that the shadow banking system i threatening to create a calamity.
Themes and local SG players
- Yanlord (Pure high end civillian real estate + shopping malls)
- Capitaland and Keppel Land (Chinese property and real estate + shopping malls)
- Capitamall Asia (Chinese retail mall play)
- Mapletree GCC (A small play on chinese office/commercial property)
- K1 Ventures (a small but strong stake in ChinaAuto - the biggest distributor of automotive in china)
- Yangzijiang (Chinese shipyard and ship builder + oil rig building)
- Noble Group (Chinese State investment owns a stake in it) - commodities an interesting play
- Wilmar - Palm oil is highly sought after but price is controlled in China.
Not withstanding a recession/ property bubble bursting (which the authorities are taking prudent steps to control), Liew Mun Leong (Capitaland former CEO) did mention a conversation with Jamie Dimon before - Where is the best place to be building and selling property?
The answer: China. The growing middle class, the creation of the super-rich from tech savvy entrepreneurs and the very fact that increasingly, urbanization of the outskirts of china leaves much room for imagination. That China is a monster of an investment dream as the next global superpower.
