Presentation +Emerging+Markets+ +Fad+or+New+Reality

7/29/2019 Presentation +Emerging+Markets+ +Fad+or+New+Reality

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DB ResearchDeutsche Bank Maria Laura Lanzeni

April 2012

DB ResearchDeutsche Bank

Emerging Markets:Fad or New Reality?


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April 2012Deutsche Bank

1

Agenda

2

1

Medium- and long-term trends

Why emerging markets matter


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Global Outlook

2

Economic forecast summary

GDP growth, % CPI inflation, %

2010 2011 2012F 2013F 2010 2011 2012F 2013F

G7 3.0 1.4 1.9 2.2 1.4 2.6 2.1 1.9

US 3.0 1.7 2.7 3.0 1.6 3.1 2.6 2.6

Japan 4.5 -0.7 2.8 1.5 -0.7 -0.3 -0.1 -0.2

Euroland 1.9 1.5 -0.2 0.8 1.6 2.7 2.5 1.7

EM Asia 9.5 7.4 7.1 7.5 4.6 6.1 4.1 4.3

China 10.3 9.2 8.6 8.6 3.3 5.4 3.1 3.5

India 9.9 7.3 7.3 8.0 9.6 9.5 6.4 6.8

EMEA 4.5 4.6 3.2 4.0 6.1 6.5 5.6 6.1

Russia 4.3 4.3 4.6 4.9 6.8 8.4 5.3 7.6

Latam 6.2 4.0 3.6 4.3 8.4 8.5 7.8 7.7

Brazil 7.5 2.7 3.2 5.0 5.9 6.5 5.0 5.7Advanced economies 2.8 1.4 1.7 2.1 1.5 2.6 2.2 1.9

EM economies 7.7 6.0 5.5 6.1 5.6 6.6 5.1 5.4

Global 5.1 3.5 3.5 3.9 3.4 4.5 3.6 3.5

Source: DB


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Emerging markets make up a large and growingshare of the world economy

3

0

10

20

30

40

50

60

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

EM China

EM share in world GDP (at PPP)

%

Source: IMF; EM here includes the newly industrialised economies in Asia

39.5%

56.5%

5.6%

15.6%


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More importantly, they contribute significantlyto global growth

4

-2

-1

0

1

2

3

4

5

6

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e

EM (incl. NIE) DM

World real GDP growth and EM contribution

Percentage points

Source: IMF, DB

EM:92%

EM:52%


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90

100

110

120

130

140

150

160

170

2007 2008 2009 2010 2011E 2012F 2013F

USA Euro area Emerging Asia China LatAm CEE EM

Source: Deutsche Bank

Real GDP, 2007=100

Cumulative growth since the crisis

70%

53%

37%

22%

15%

6.6%

0.0%

Global financial crisis accelerated the West-East shift

5


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April 2012DB ResearchDeutsche Bank

Decoupling yes or no?

6

-6

-4

-2

0

2

4

6

8

10

12

-6

-4

-2

0

2

4

6

8

10

12

2007 2008 2009 2010 2011E 2012F 2013F

Latin America Emerging Asia

Industrial countries CEE

Real GDP growth, % yoy

Source: Deutsche Bank

EMs will continue to outperform DMs

40

60

80

100

120

140

160

07 08 09 10 11 12

EM (right) World (left)

MSCI Indices, Jan 2, 2007=100

EM stocks sensitive to global shocks

Sources: Bloomberg, DB

Lehman GreeceSep 11sell-off


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Economic fundamentals had a dramatic improvement ...

7

0

20

40

60

80

100

120

2000 2002 2004 2006 2008 2010 2012EM* DM

Public debt: A new world

General government gross debt, % of GDP

* Not including newly industrialised economiesSource: IMF

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0

5

10

15

20

25

30

35

40

45

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

External debt (left) Interest payments on ext. debt (right)

External debt less of a burden

% of GDP, EM aggregate*

* Not including newly industrialised economiesSource: IMF


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which in turn led to a large country risk realignment

8

0

200

400

600

800

1,000

1,200

PT IE ES IT BE TR PL FR RU ID BR CN DE

"Great risk shift" - Emergingmarkets trade inside several DMs5Y CDS spreads, bp

Source: Bloomberg as of Apr 23, 2012

10.00

12.00

14.00

16.00

18.00

20.00

22.00

2005 2006 2007 2008 2009 2010 2011

DM EM

Sovereign rating convergence

L/t foreign currency ratings, weighted averages

Source: DB based on the average of S&P, Moody's, Fitch ratings

AAA

BBB

A

BB


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9

Agenda

2

1

Medium- and long-term trends

Why emerging markets matter


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Emerging markets: Poor but sexy

10

0

50

100

150

200

250

300

0

10,000

20,000

30,000

40,000

50,000

IN CN BR RU JP DE US

2011 level (left) % change vs 2000 (right)

Strong convergence under way

GDP per capita, USD (PPP)

Source: IMF

0

200

400

600

800

1,000

1,200

E. Asia S. Asia CEE LatinAmerica

MENA SSA

1990 2005

Lots of new consumers

Population living on USD 2 - USD 13 a day, million

Source: The Economist based on M. Ravallion


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Demographic developments very uneven for EMs

11

0

10

20

30

40

50

2000 2005 2010 2015 2020 2025 2030

Brazil Russia India China Germany

India is the demographic winner

Old-age dependency ratio*, %

* Ratio of population aged 65+ to population aged 15-64. Projections correspond to the medium variantSource: UN


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Growth rates of urban agglomerations, 1970-2011

Urbanisation: The past

12

Source: UN


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Growth rates of urban agglomerations, 2011-2025

Urbanisation: The future

13

Source: UN


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The new corporate world

Emerging market companies: Climbing the ranks

14

particularly in banking30 largest banks worldwide, % of total market cap.

US25.0

UK13.1

Other DM25.9

China

26.4

Brazil7.1

Russia2.6

US39.8

UK12.5

Other DM

47.7

Sources: IMF, BanksDaily.com, DB

2006

Ten largest companies in the world by market cap.

Global rank Company Country

2011 2010

1 2 Exxon Mobil US

2 1 PetroChina China

3 5 Apple US

4 4 ICBC China

5 1 Petrobras Brazil

6 6 BHP Billiton Australia/UK

7 11 CCB China

8 19 Royal Dutch Shell UK

9 25 Chevron US

10 3 Microsoft US

Source: FT

2010


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Why not industrial countries yet?

15

0

20

40

6080

100

120

140

160

DE JP US KR SA TR ZA BR CN IN MX ID RU

Corruption perceptions index 2011* Ease of Doing Business 2012**

Low quality of institutions in many emerging markets

Ranking out of 183 countries

* Indicates the perceived level of public sector corruption. A country's rank indicates its position relative to the other countries in the index.** A high ranking (i.e. lower number) means the regulatory environment is more conducive to the starting and operation of a local firm.

Source: Transparency International, World Bank


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Copyright 2012. Deutsche Bank AG, DB Research, 60262 Frankfurt am Main, Germany. All rights reserved. When quoting please cite Deutsche Bank

Research.

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expressed may differ from views set out in other documents, including research, published by Deutsche Bank. The above information is provided forinformational purposes only and without any obligation, whether contractual or otherwise. No warranty or representation is made as to the correctness,completeness and accuracy of the information given or the assessments made.

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