Global Power Shift Implications for Investors

Dr. Frank-Jürgen Richter

Chairman

Horasis: The Global Visions Community

Citywire Switzerland, Gstaad, 20 September 2012

Copyright Horasis 2012

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The current state of the world

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… is quite gloomy

terrorism war economic crisis

Is the economic crisis here to stay?

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Warren Buffett: The recession is going to get worse. I don't

want to hold out false hopes that -- by some magic bullet --

that things will turn around in a couple months.

The Fall of Europe

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Angela Merkel: We are challenged ….

…. in our governance

The human reaction is fear

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… resulting in

anti-globalization protectionism clash of civilizations

Global Power Shift

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Rise of the BRICs Social Drift ‘Japanization’

Dreaming with BRICs

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Source: Goldman Sachs (2003): Dreaming With BRICs: The Path to 2050

BRICs:

• Brazil

• Russia

• India

• China

China: astonishing facts

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•

• biggest user of broadband

• second biggest user of energy

• no1 producer of motherboards

• China Mobile: largest TelCo

• Chongqing: world's largest city

• 1 mill. engineer grads per year

BRICs bashing is

… fashionable

• 7-8% GDP growth in China / India

• 4-5% GDP growth in Russia / Brazil

• Competition for natural resources

• Low cost manufacturing

• BRIC companies highly innovative/competitive

• Differing value systems / political systems

• ‘a new great game’

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Washington vs Beijing consensus

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China and other emerging markets begin to dominate the

global agenda

Europe: China’s Euro-Disneyland?

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BRICs and China

• India is top IT-outsourcing destination

• Russia is a large provider of oil and gaz

• Brazil is a main source for commodities

• China’s economic exchange with the other BRICs is increasing

• BRICs-Summit: China seems to take the lead

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BRICs: Opportunities

outweigh risks

• strong fundamentals

• Innovation / intellectual property

• improved corporate governance

• Long-term financing / stable stock exchanges

• Social welfare

• Willingness to work hard

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Growth forever?

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• Are BRICs contagion free from a

global slowdown?

• Can China shift to domestic consumption?

• How can BRIC-firms embrace socially

responsible and environmentally friendly

globalization strategies?

• What is the BRIC’s impact on global growth?

• What is the BRIC’s role in this post crisis

economic order?

Are BRICs decoupling?

no…. BRICs’ growth is stuttering

• China: lowering exports, leadership change

• India: political paralysis

• Russia: dependency on oil/gas exports, mass

protests

• Brazil: a Latin American laggard

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Beyond the BRICs

• South Africa now part of BRICS

• ´The next Eleven’

• Africa: the new frontier markets

• Globalization is uplifting developing countries into emerging/frontier markets status

• The borderline between OECD-countries and developing countries is blurring

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‘Reverse globalization’

• New North-South / West-East conflict

• Industrialized countries are losing ground

• ‘Japanization’ (lost decade) of Europe/the US

• Outsourcing as new paradigm

• Protectionism and economic nationalism

• BRICs rising to global eminence

• BRICs as alternative?

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Is the G20 delivering?

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The promise: ‘talk and smile’ The reality:

inclusiveness G0/G2 - ruderless world

Making sense of a G0/G2 world

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Framework for investors: The past

• Anglo-Saxon model: short-term profit taking

• free market libertarianism

• little government intervention

• ‘money matters’

• Washington Consensus

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Framework for investors: The present and future

• Asian model: based on long-term benefits

• State as important actor

• Stakeholder value instead of shareholder value

• ‘Society matters’

• financing of sustainable projects

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Global Risks

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… investments … growing risks

hazardous threats

turbulances

systemic disruption

How shall investors deal with

(reverse) globalization?

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• balancing global developments with local roots

• perceiving globalization as opportunity, not threat

• moving pro-actively into emerging markets

• building virtual organizations

• speed is king

Ideas for investors

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• BRIC-domiciled firms in general

• BRIC-firms internationalizing through M&A

• European/US firms with strong BRIC-presence

• European/US firms having BRIC-shareholders

• don’t forget: there are excellent firms based in

OECD-countries, despite economic gloom there

Winning the future!

… with China / the BRICs

• Hope for the best - expect the worst

• Ride on the Chinese dragon

• Embrace technology

• ‘Chinanize’ your investments

• The future is not gloomy!

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