Standard Chartered Bank BeyondBRIC

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)


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)


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)


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


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


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


No effect


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


No effectWheatCotton


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%


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%


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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