Kevin Lings Stanlib 15.11

8/3/2019 Kevin Lings Stanlib 15.11

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KEVIN LINGSSTANLIB CHIEF ECONOMIST


2/44

Greece 2-year Bond Yield

05

10152025

303540455055606570

75

80859095

100

200

9

201

0

201

1

%, yield, daily


3/44

Market Capitalisation of Apple vs

Euro-area Banks

0

200

400

600

800

1000

1200

200

7

200

8

200

9

201

0

201

1

$ Billion, market capitalisation

Euro-area banks

Apple


4/44

USA


5/44

Index

US Consumer Confidence

20

40

60

80

100

120

140

160

8 5 8 6 8 7 8 8 8 9 9 0 9 1 9 2 9 3 9 4 9 5 9 6 9 7 9 8 9 9 0 0 0 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1


6/44

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

20

05

20

06

20

07

20

08

20

09

20

10

20

11

%q/q, annualised

US Real Consumer Spending

Growth


7/44

-60

-50

-40

-30

-20

-10

0

10

20

30

40

'2010 N D '2011 F M A M J J A S O

000s

US Government Employment


8/44

-50

0

50

10 0

15 0

20 0

25 0

30 0

'2010 N D '2011 F M A M J J A S O

000s

US Private Sector Employment


9/44

-10

-8

-6

-4

-2

0

2

4

6

200

7

200

8

200

9

201

0

201

1

201

2

%q/q

High estimate

Low estimate

Consensus

Consensus forecast updated October 2011

US Real GDP Growth Forecast


10/44

0

1

2

3

4

5

6

7

197

0

1971

1972

197

3

1974

197

5

197

6

1977

197

8

197

9

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

201

0

2011

Million

US Unemployed for 27 Weeks or

More


11/44

10

12

14

16

18

20

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Million

US Employment in Manufacturing


12/44

11

12

13

14

15

2005

2006

2007

2008

2009

2010

2011

Million

US Vacant Homes (Year-round)


13/44

Las Vegas house price index, nominal, S&P Case Shiller

90

100

110

120

130140

150

160

170

180

190

200

210

220

230

240

01 02 03 04 05 06 07 08 09 10 11

Prices have

declined by 60%

US House Prices in Las Vegas


14/44

US Gross Government Debt

61.1 62.371.6

85.294.4 100

105 108.9

0

20

40

60

80

100

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

%, percent of GDP


15/44

1.0

1.3

1.5

1.8

2.0

2.3

2.5

2.8

3.0

3.3

3.5

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

$bn, 12-month running total

Expenditure

Tax revenue

US Federal Budget


16/44

Euro-area


17/44

Greece GDP Growth

-9-8-7

-6-5

-4-3

-2-1012

345

67

2004

2005

2006

2007

2008

2009

201

0

2011

%y/y


18/44

Greece Retail Sales

-20

-17

-14

-11

-8

-5

-2

1

4

7

10

2008

2009

201

0

2011

%y/y


19/44

Greece Unemployment Rate

%


20/44

Greece Equity Market

700

1200

1700

2200

2700

3200

3700

4200

4700

5200

5700

2006

2007

2008

2009

201

0

2011

Greece equity market, index

-85%


21/44

Greece Government Debt

106.1 105.4 110.7

127.1142.8

165.6189.1 187.9

0

20

40

60

80

100

120

140

160

180

200

2006

2007

2008

2009

201

0

2011

2012

201

3

%, percent of GDP


22/44

Greece and Euro Bail-out Package:

26 October 2011

Value of support package for Greece will now be 130 billion, upfrom 109 billion when the 21 July 2011 deal was concluded

Deal with private banks and insurers to accept a 50% loss onholdings of Greek government bonds

Recapitalisation of the European banking sectorby around 106billion.

Scale up the EFSF. Fund was 440, but has provided help to

Ireland, Portugal and Greece, leaving around 290 billion. Around250 billion of that will be leveraged 4-5 times, producing a

headline figure of around 1.0 trillion


23/44

Greece Government Debt Billion

0

50

100

150

200

250

300

350

400

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

201

0

2011

Billion

Increased by an average of 14.2% a year


24/44

Greece vs Italy Government Debt

Billion

0

200

400

600

800

1000

1200

1400

1600

1800

2000

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

201

0

2011

Billion

ItalyGreece


25/44

Spain

11.5%

Italy

16.8%

Ireland

1.7%

Greece

2.3%

Germany

27.2%

France

21.0%

Belgium4.0%

Cyprus

0.2%

Malta

0.1%

Netherlands

6.4%

Portugal

1.8%

Slovakia

0.7%

Luxembourg

0.5%

Slovenia

0.4%

Austria3.2%

Estonia

0.2%

Finland

2.0%

Breakdown of Euro-area GDP


26/44

Japan

Japan Prime Ministers 7 Prime


27/44

Weak prime minister controlled by shifting powers of intraparty interests

Japan Prime Ministers 7 Prime

Ministers in

6 Years

Junichiro

Koizumi1 979 days

Shinz

Abe365 days

Yasuo

Fukuda364 days

Taro

Aso357 days

Yukio

Hatoyama265 days

Naoto

Kan451 days

Yoshihiko

Noda2 Sep11
http://en.wikipedia.org/wiki/File:Yoshihiko_Noda_cropped_Noda_Geithner.jpghttp://en.wikipedia.org/wiki/File:Naoto_Kan_cropped_3_Naoto_Kan_2_20110129.jpghttp://en.wikipedia.org/wiki/File:Hatoyama_Yukio_1-3.jpghttp://en.wikipedia.org/wiki/File:Fukuda_Yasuo_1-3.jpghttp://en.wikipedia.org/wiki/File:Aso_Taro_1-2.jpghttp://en.wikipedia.org/wiki/File:Abe_Shinz%C5%8D.jpghttp://en.wikipedia.org/wiki/File:Koizumi_2010_cropped.png


28/44

Japan Gross Government Debt

191.3 187.7 195216.3 220

233.1 238.4 242.9

0

25

50

75

100

125

150175

200

225

250

2006

2007

2008

2009

201

0

2011

2012

201

3

%, percent of GDP


29/44

0

5

10

15

20

25

30

35

40

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2004

2005

2006

2007

2010

2020

2030

Percent of total population, %

Percentage of population younger than 15

Percentage of population older than 64

Percentage younger than 15:Japan, 13.0%

China, 21.6%

Brazil, 27.8%

India, 33.0%

Japans Aging Population


30/44


31/44

Government Debt % of GDP

30

40

50

60

70

80

90

100

110

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

201

0

2011

2012

% of GDP

Emerging markets

Advanced economies


32/44

Recent Sovereign Rating Changes

Upgrades Israel (Sep)

Peru (Aug)

Czech Republic

(Aug) Estonia (Aug)

Uruguay (Jul)

Bulgaria (Jul)

Angola (Jul)

Brazil (Jun) Colombia (May)

Downgrades Italy (Sep)

USA (Aug)

Japan (Aug)

Greece (Jul)

Portugal (Jul)

Spain (Jul)

Ireland (Jul)

S i C dit R ti L


33/44

Developed markets

Emerging markets

Sovereign Credit Ratings on Long-

Term DebtAverage of Moody's S&P, and Fitch long-term ratings


34/44

$ Billion

0

100

200

300

400

500

600

700

800

900

1000

1100

1200

1300

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Emerging Markets Private Capital

Inflows (net)


35/44

$ Billion

0

50 0

1000

1500

2000

2500

3000

3500

4000

4500

5000

5500

6000

6500

7000

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Emerging Markets Foreign Reserves

(excluding gold)


36/44

Fixed Investment Activity

1516171819

2021222324252627

282930313233

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

201

0

2011

% of GDP

Emerging markets

Advanced economies

Industrial Production: Developed


37/44

75

10 0

12 5

15 0

17 5

20 0

22 5

25 0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

201

0

2011

Index

Emerging Economies

Developed Economies

Industrial Production: Developedvs.

Emerging Markets


38/44

2001

USA 32.1% of World2011

USA 21.5% of World

1994

Japan 17.8% of World 2011Japan 8.4% of World

USA and Japan has lost economic power


39/44

1991

China 1.8% of World2011

China 10.0% of World

China has gained economic power


40/44

50

100

150

200250

300

350

400

450

500

550

600

650

700

750

800

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

SA exports to emerging markets vs developed markets

Index, Jan 1998 = 100

SA exports to emerging markets

SA exports to developed markets

Relative performance chart

What are the investment


41/44

What are the investmentimplications of the current macro-

economic environment?


42/44

SA Equities vs. US Equities

83

86

89

92

95

98

101

104

201

1

F M A M J J A S O 80

85

90

95

100

105

110

SA equities, Index

SA equities (lhs)

US equities (rhs)

US equities, Index


43/44

SA Bonds vs. US Bonds

7.0

7.3

7.5

7.8

8.0

8.3

8.5

8.8

9.0

9.3

9.5

2009

201

0

2011

1.5

1.8

2.0

2.3

2.5

2.8

3.0

3.3

3.5

3.8

4.0

4.3

SA bonds, % yield

US bonds (rhs)

SA bonds (lhs)

US bonds, % yield


44/44

Three Key Investment Thoughts

Need to lower expectations of investment return especially indeveloped markets

Need to increasingly take a world view of investments global investmentthemes increasingly applicable

Diversification is crucial given current uncertainty

Documents

Kevin Lings Stanlib 15.11