Archive for November, 2011

Readers’ Questions Answered Part VIII

November 22, 2011 Leave a comment

It’s been a while since I answered some readers’ questions. Thank you, readers, for all your responses to the blog—they have been highly encouraging.

Do you think there will be a recession globally or in emerging markets from a mid- to
long-term perspective?

– Asli, Turkey

From a mid- to long-term perspective I believe the global economic situation continues to look very good for a number of reasons. First of all, many emerging markets have continued to grow at a rapid pace and we don’t expect growth to slow down too much over the next decade, although the percentage changes can naturally decelerate when the GDP numbers get bigger. 

Second, we believe the situation in Europe can be worked out and there will likely be considerable reform in European countries such as cuts in government spending and measures taken to stimulate business by lowering taxes and reducing bureaucratic burdens. We expect the same could happen in the U.S. and Japan, as those countries and the entire developed world are learning that one way to stimulate growth is to allow business and private enterprise to grow, particularly the small and medium size businesses. Although the move to these policies will likely take some time, we already see the signs of potential change.

What is the impact if one or more countries withdrew from the euro?

– Shiv, India

Read more…

Categories: Perspective

Commodities & Consumers in Latin America

November 12, 2011 Leave a comment

Many investors assumed that some Latin America countries have been posting strong growth in recent years by riding on the commodities boom, which is currently tapering off in the face of slower prospects of growth in U.S., Europe and China. I provided some views in a recent video interview that I thought you might like to know.

Trouble viewing video? Click Here


Categories: Perspective

Flooding in Thailand

November 3, 2011 Leave a comment

Thailand is battling through the worst flooding in decades. The floods have severely affected over 30 provinces in north and central Thailand, taking a devastating toll on the people there. Estimated damages now range between 1-2% of GDP. Six main industrial estates in the Ayutthaya and Pathum-thani provinces have flooded, impacting over 1,000 factories and supply chains in electronics, electrical and automotive industries. Major retailers have been forced to suspend operations of distribution centers due to logistics disruption. Agriculture is also severely hit with more than 10% of the rice plantation area affected. Based on the data released, Thailand would need at least a month to drain away the current floodwaters.

The banking sector is among the other sectors we expect will be negatively impacted. As a result of a downgrade in projected GDP growth by the Thai central bank of about 2% for 2011, we anticipate bank earnings could drop by more than 2%. We would expect margins for consumer companies could also be hard hit as a result of higher raw material prices as well as higher distribution costs. However, that could balance out if those companies are able to raise prices. We anticipate energy companies should not be impacted as negatively given that demand for energy will likely be increasing.

While the consequences of the flood damage will negatively impact Thai corporate earnings, we believe the long term outlook for Thailand remains strong. In addition to the corporate tax cuts and various stimulus packages that have already been announced, the Thai government plans to spend Bt400 billion (US$13 billion) on investments in dams, irrigation and water management to restore the country. We believe Thailand should also remain an attractive place for foreign direct investment (FDI) due to location advantages, a supportive business environment and highly competitive workforce. While devastating in the near-term, we believe that impact from the flooding should prove short-lived, and that Thailand should recover well from this disastrous event.

Categories: Perspective