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We are in a super-cycle, again
Section 1: Current Situation
4
The world is growing
308,285
133,676
62,346
32,06122,856
20,000
60,000
100,000
140,000
180,000
220,000
260,000
300,000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
World GDP (Nominal)
Nominal world GDP since 1990 USD billions
Sources: IMF, Standard Chartered Research
5
20
25
30
35
40
45
50
55
60
65
1990 1995 2000 2005 2010
World nominal GDP
Nominal world GDP since 1990 USD trn
32.1
61.157.7
64.7
0
10
20
30
40
50
60
70
2000 2008 2009 2011
World nominal GDP (USD trn)
World nominal GDP current cycleUSd trn
The world is growing (2)
Sources: IMF, Standard Chartered Research
6
State, 2010
MENA 4%
Latam 11%
CIS 4%
US 18%
RoW 7%
Africa 2%
Asia 42%
EU 8%
Japan 4%
70% of global growth this year is coming from EMs (% of world total)
Sources: IMF, Standard Chartered Research
7
Asian trade has already recovered past pre-
70
80
90
100
110
120
Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Jul-10
Inde
xed,
Apr
il 20
08 =
100
World exports Asian exports Advanced economies exports
Export volumes (indexed to pre-crisis peak, April 2008)
Sources: IMF, Standard Chartered Research
8
Appreciating currencies
95
105
115
Sep-09 Oct-09 Nov-09 Jan-10 Feb-10 Apr-10 May-10 Jul-10 Aug-10 Sep-10
THB IDR BRL ZAR
Strong appreciations: Thai baht, Indonesian rupiah, Brazilian real, South African rand
Sources: Bloomberg, Standard Chartered Research
Section 2: The super-cycle
10
The third super-cycle
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 2020
Actual world GDP growth Average world GDP growth
1820-1870: 1.7%
1870-1913: 2.7%
1913-1946: 1.7%
1946-1973: 5.0%
1973-1999: 2.8%
2000-2030: 3.6%
Real world GDP growth since 1820 %
Sources: Maddison, IMF, Standard Chartered Research
11
Asia ex CIJ 8%
SSA 5% MENA
6%
Latam 9%
EU-27 14%
Japan 3%
ROW 5%
India 10%
China 23%
CIS 5%
US 12%
Asia ex CIJ 6%
SSA 2%
MENA 3%
Latam 6% EU-27
27%
Japan 10%
ROW 6%
India 3%
China 10%
CIS 3%
US 24%
The shift in the balance of power
Nominal GDP 2010, USD 62trn% of global
Nominal GDP 2030, USD 308trn% of global
Sources: IMF, Standard Chartered Research
The New World Order
1990 USD trn 2000 USD trn 2010 USD trn 2020 USD trn 2030 USD trn
1 US 5.8 US 10.0 US 14.6 China 24.6 China 73.5
2 Japan 3.0 Japan 4.7 China 5.9 US 23.3 US 38.2
3 Germany 1.5 Germany 1.9 Japan 5.6 India 9.6 India 30.3
4 France 1.2 UK 1.5 Germany 3.3 Japan 6.0 Brazil 12.2
5 Italy 1.1 France 1.3 France 2.6 Brazil 5.1 Indonesia 9.3
6 UK 1.0 China 1.2 UK 2.3 Germany 5.0 Japan 8.4
7 Canada 0.6 Italy 1.1 Italy 2.0 France 3.9 Germany 8.2
8 Spain 0.5 Canada 0.7 Brazil 2.0 Russia 3.5 Mexico 6.6
9 Brazil 0.5 Brazil 0.6 Canada 1.6 UK 3.4 France 6.4
10 China 0.4 Mexico 0.6 Russia 1.5 Indonesia 3.2 UK 5.6
Source: Standard Chartered Research
13
Export to GDP ratio %
0
5
10
15
20
25
30
35
1820 1870 1913 1929 1950 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2030
%
Sources: Madisson, IMF WEO, Standard Chartered Research
14
-South trade likely to continue booming
Major trade corridors 2009 - 2030
China
Asia ex CIJ
IndiaMENA
Sub-SaharanAfrica
LATAM
United States
EU-27
2030
01 3 6
USD trn
2008
Sources: Madisson, IMF WEO, Standard Chartered Research
1515
Population in 2009 and prediction for 2030
Sources: UN, Standard Chartered Research
16
Urbanisation in 2010 and prediction for 2030
Sources: UN, Standard Chartered Research
1717Sources: OECD, Standard Chartered Research
Real GDP/capita 2000 2030 at market exchange ratesUSD
18
Middle class now and in 2030
Size of the middle class in 2009 and prediction for 2030
Sources: Mckinsey, World Economic Forum
19
A Chinese luxury wedding
Source: OMG
20
0
100,000
200,000
300,000
400,000
500,000
600,000
1995 1997 1999 2001 2003 2005 2007
Japan US Europe (incl UK)China South Korea
Creativity is key
Distribution of tertiary educated population by 2030 (%)
Number of patents filed by country
United States
9%
Japan5%
EM Asia18%
EM Europe + ME10%
Latam9%
China13%
India16%
Developed economies
13%
Africa7%
Sources: WDI, WIPO, Standard Chartered Research
What does the world want?
What does the world want next?
Spending habits at different per-capita income levels
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
TV Motor-cycle Cell phone Car Tourism Universityeducation
Financialservices
Per c
apita
inco
me
Source: IAFM (International Academy of Financial Management)
Commodities: Winners and Losers
Source: Standard Chartered Research
Russia & CIS
MENA
Sub-Saharan Africa
China
India
Japan
Rest of Asia (ex Japan)
Australia LATAM
United States
Canada EU-27
Norway
Expected to remain net importer of coal and oil
Vietnam and Indonesia dominate thermal coal export market, although domestic demand growth is
exportable surplus
Currently largest oil producer. Holds 9.2% of global oil reserves and 19% of global coal reserves. Well placed to export to both China and Europe
Holds 30% of global coal reserves. Third-largest oil producer, but dependent on imports for over 60% of crude oil demand
Net oil-exporting region. Brazil is one of the most prospective non-OPEC countries and on the cusp of becoming a significant net crude oil exporter. Region holds 2% of global coal reserves Colombia is key exporter
Relies heavily on coal & oil imports, despite significant investment in nuclear and renewable energy
Holds 14% global coal reserves, but imports are preserving future domestic supply. Fourth-largest crude oil producer, but imports 55% of oil needs. Investment in nuclear and renewables is curbing future needs, but likely to remain dependent on fossil fuels
9% of global coal reserves
Holds 7% of global coal reserves but infrastructure must improve to reduce dependence on imports. High dependency on crude oil imports
South Africa a large exporter of coal. Region expected to remain a net oil exporter
Holds 60% of global proven oil reserves, equivalent to 78 years of current production
Net oil exporter with sizeable reserves Net oil exporter
Commodities: Winners and Losers
No effect
Source: Standard Chartered Research
Russia & CIS
MENA
Sub-Saharan Africa
China
India
Japan*
Rest of Asia (ex Japan)
Australia
LATAM
United States
EU-27
Kazakhstan produces an excess of copper. Ample reserves
Zambia is currently the dominant copper producer, with the DRC another potentially important supplier. Timely mine development will be required to allow the region to benefit from the super-cycle
Chile and Peru are dominant producers of copper, and low consumption levels allow them to be major winners in a super-cycle. While some mines are reaching end of natural life, the region will continue to be a dominant supplier
Large metal consumer. Limited domestic mine production exposes it to high prices
Will need to import raw materials to feed strong domestic demand for base metals
India is a large consumer of metals due to a rapid expansion in manufacturing. Relies heavily on imported copper raw materials
China has a structural deficit in copper with local reserves being poor quality. Strong demand will make it reliant on imports
Copper deficit
Commodities: Winners and Losers
No effectWheatCotton
Source: Standard Chartered Research
Russia & CIS
MENA
Sub-Saharan Africa
China
India
Japan
Rest of Asia (ex-Japan)
Australia
LATAM
United States
EU-27
Despite persistent weather shocks can increase acreage and FAO forecasts Russia alone accounts for 9% of global wheat output over next 10 years compared with 7% now
Global acreage domination with cotton. Cotton output has increased around 10% over the last 10 years, compared with the global average of 1%. Significant upside potential exists on the back of better farming techniques. Proximity to China will boost overall market share. Population growth to pressure wheat balances into a deficit by 2018
A large net importer. Current wheat output covers only 30% of current consumption and is likely to stagnate at this level over the forecast period in the absence of significant investment in agriculture
Currently top exporter of wheat and cotton and will remain an established and cost- effective exporter of both commodities globally, despite some loss of market share
Potential to increase wheat acreage and output by up to 5mt by 2020. However, output is vulnerable to weather shocks
Japan continues to register a sizeable net trade deficit for wheat and coarse grains. Current wheat output covers less than 15% of consumption
Wheat harvests likely to increase, albeit moderately, from current production. Exports of wheat will remain strong over long term, particularly to MENA importers. Region likely to suffer from higher textile prices as cotton prices rise
Wheat consumption far outstrips output in the MENA region;; deep deficits are likely to remain in place long-term given that region also has a water deficit
Imports 30% of all cotton. Structural deficit in cotton will worsen given that per-capita consumption outpaces per- capita output. Meanwhile, a drop in per-capita consumption of wheat vs. a rise in per-capita output will boost exportable surpluses
Where next to invest?
Global equity-market capitalisation, 2009 USD trn, % of USD 45.4trn total
ROW , 8, 18%
Japan , 3.5, 8%
EU-27 , 10.1, 23% US , 13.7, 31%
Asia ex CIJ , 4.5, 10%
India , 1.3, 3% China , 3.3, 7%
Sources: IMF, Standard Chartered Research
Global equity-market capitalisation, 2030 USD trn, % of USD 322.1trn total
ROW , 85.7, 26%
Japan , 6, 2%
EU-27 , 34.6, 11%
US , 45.7, 14% Asia ex CIJ ,
42.5, 13%
India , 27.8, 9%
China , 79.8, 25%
Source: Standard Chartered Research
Section 4: Risks
29
Known unknowns - policy mistakes in the west
Financial Markets Symposium Dinner - 21st September 2010
30
Known unknowns political instability
30
Population (million)
0
10
20
30
40
50
60
70
Yemen
Financial Markets Symposium Dinner - 21st September 2010
31
Known unknowns - the environment
Physical Water Scarcity Little or No Water Scarcity
Economic Water Scarcity Not Estimated
Sources: International Water Management Institute
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