why emerging market is important

Global Capital Market – Lecture 1W Capital Market Theories CAU Wonil Lee, Ph.D, & CFA Why Emerging Market is important?. EM are Critical Mass in the World Economy economy.. supply and

Global Capital Market – Lecture 1W

Capital Market Theories

CAU

Wonil Lee, Ph.D, & CFA

Why Emerging Market is important?

April, 2015

2008년 글로벌 금융위기 이후, ‘New Normal’이 새로운 패러다임으로 부상

- 선진국에서 신흥국으로 경제 중심 변화

‘New Normal’ 패러다임 하 투자방안

- 신흥국 주식 투자, 안전자산으로의 자산배분

위기 이전 : Old Normal

부의 이전 : 선진국으로

 고성장

 과소비, 낮은 저축률

 레버리지 가속화

 규제완화, 글로벌화 지속

 금리하락

 낮은 물가

위기 이후 : New Normal

부의 이전 : 신흥국 으로

 저성장 시대

 소비감소, 저축률 증가

 디-레버리지

 규제강화, 탈 글로벌화

 장기적으로 금리상승

 장기적으로 물가상승

2

Economic Paradigm Shift: New Normal!!

* Source : Bloomberg, Citi Research

** % of GDP

GDP성장률 2.4 3.4

CPI 5.3 5.2

경상수지** 0.0 -1.6 재정수지** -1.7 -3.3

Africa/

GDP성장률 5.2 5.7

CPI 5.0 6.0

경상수지** 10.6 6.1

재정수지** 3.4 -2.2

GDP성장률 6.2 6.5

CPI 3.9 4.0

경상수지** 1.7 1.3

재정수지** -2.4 -2.2

GDP성장률 2.4 3.9

CPI 5.8 5.9

경상수지** -1.7 -1.9

재정수지** -2.3 -2.5

EM 2012 2014F

GDP성장률(%) 4.7 5.4

CPI(%) 4.6 4.8

경상수지** 1.8 0.8

재정수지** -1.7 -2.5

DM 2012 2014F

GDP성장률 1.0 2.2

CPI 1.4 0.9

경상수지** -0.1 -0.3

재정수지** -5.2 -3.1 Economic Power moves from West to East: DM to EM

3

EM are Critical Mass in the World Economy

economy

spending – that are vital ingredients for high and dynamic rates of

economic growth

compared with only 18% in 1995; about 50% of global exports,

compared with 27% in 1990; and 50% of global capital spending,

compared with 26% in 1990

EM have been major source of global growth

Japan in 1960-80s, China in 2000, etc

supply and tends to have less debt compared with developed markets

commodities for developed markets

long term

Main Drivers of EM Strength

powerhouse, and (2) population growth in EM

bypassing Germany

with US$3.4 tr in the developed market countries

484 mil to 440 mi land Japan’s population, from 126 mil to 108 mil,

respectively

above the age of 65

Population matters…

anticipated to experience population declines, but majority of EM

nations should have continued population growth for the next 40 years

is expected to reach 1.285 bil from current 1.34 bil while other nations such as South East Asian countries and South American countries will continue to show population growth by 2050

increasing from the current 1 bil to 2.2 bil

2011 to 403 mil by the end of 2050

EM: Two Decades of Volatility

Indonesia, Malaysia Contagion Effect

system from pegging with the US dollar, experienced crisis due to

serious currency devaluation in 1999 and 2000

years In 1990, EM market cap was only $310bn or 3% of global market cap but it reached $14.5 tr or 23% or global market cap in 2008 and

plunge about 50% after financial crisis in 2008

Factors Affecting EM Performance in the Future

market cap

the determining factors of EM

to 7% in 2013 The key question is whether China can manage a soft landing towards 4-5% level

is critical to have stability in its exports

residential real estate market has big bubble

 The US economy is number one economy in the world and important market for EM countries

US economy so far but FED is now taking tapering stance to absorb its liquidity This could harm EM countries who has higher

dependency on the US economy

issues such as Greece, Spain, and lately Russia

soundness

Well being of the US Economy is also Critical

 EM countries are typically have had 15 – 20 years to develop their economic momentum while frontier markets are much younger

basically just getting started Stock markets in frontier countries are younger than 20 years old

market have aggregate GDP of $ 3.7 tr as of 2011 Frontier markets are much smaller but higher potential for future growth

Emerging vs Frontier Markets