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  • The Next 11 emerging economies...

    Miki, pred 164 dnevi | Komentiraj (1)

    The BRIC countries (Brazil, Russia, India and China) were named in 2003 as the most rapidly developing countries with the greatest economic potential. With these countries continuing to develop fast, albeit at different rates, it is useful to look at the next tier of emerging economies. Those countries following the BRIC path will typically experience high rates of population growth, creating a growing pool of potential consumers, at the same time as rising disposable incomes.

    Key points

    Since the acronym BRIC was coined by Goldman Sachs in 2003, the economies of these countries have grown rapidly, with China experiencing the highest growth in the group and Brazil the lowest; In 2005 Goldman Sachs mooted the BRIC successors, otherwise known as the Next-11 (N11). This grouping comprises Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, the Philippines, Turkey and Vietnam; The N11 countries share the characteristics of rapidly growing populations combined with significant industrial capacity or potential; Together, these factors indicate a growing consumer market with increased earning potential, creating business opportunities for both local and international firms; However, long-term risks to the progression of the N11 towards BRIC economic levels include slowing oil production for those that are oil exporters, and mounting levels of political instability.

    Background

    The original 2003 Goldman Sachs research focused on Brazil, Russia, India and China as the economies with the greatest development potential to 2050 on the basis of positive economic fundamentals, large and growing populations, and the ability to exploit resource assets, such as oil. By 2008 this hypothesis is playing out.

    All the BRIC countries have posted consistent economic growth since 2001, despite the global economic downturn of 2001-2002. In 2007, economic growth registered 4.4%, 7.0%, 8.9% and 11.5% for Brazil, Russia, India and China respectively:

      Real GDP growth in Brazil, Russia, India and China: 2001-2007   Source: Euromonitor International from International Monetary Fund (IMF), International Financial Statistics and World Economic Outlook/UN/national statistics

    Next 11 countries

    The N11 countries are Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, the Philippines, Turkey and Vietnam. Although varied both geographically and economically, these 11 countries have features in common that are believed to single out their high economic potential:

    All have large and growing populations. Between 1980 and 2008, population growth was highest in Pakistan at 110.8%, with the lowest being in South Korea, with 28.4% period growth; Of the N11 countries, Indonesia had the largest population as of January 2008, with 228.9 million people, while South Korea had the smallest at 47.6 million; In 2006, Mexico had the highest sum of private final consumption expenditure, totalling US$567 billion. Vietnam had the lowest, at US$36.8 billion; All 11 countries demonstrate population growth rates above those of Western developed economies, indicating greater consumer market potential over the medium term. Large populations represent a wide potential pool of consumers for businesses to target, while high growth rates mean that this market will expand rapidly, providing proportionally more potential customers.

    Current consumer trends

    In 2007, the N11 economies performed markedly differently, with varying implications for consumer spending trends:

    In 2007, real GDP growth varied between 2.9% and 8.3% year-on-year, for Mexico and Vietnam respectively; These differing growth levels were led by country-specific factors. For example, Mexican growth fell from 4.8% in 2006 owing to the Mexican economy's close links to the US economy, which experienced decelerating growth in 2007 owing to a growing credit crisis, particularly in the housing sector, growing by only 1.9%, compared to 2.9% in 2006; By contrast, Vietnamese economic growth was fuelled by strong export figures, particularly of textile goods, and a surging tourism industry. In addition, Vietnam benefited from a diversified export market, meaning that it was less affected by the slowdown in the USA. In 2006 Vietnam sent 22.8% of its exports to the USA, while Mexico sent 85.8%; Consumer markets in Vietnam therefore possessed greater growth potential, with high economic growth rates encouraging wage and job growth.

    Sustained strong economic growth in the N11 countries is creating new consumer markets that can be targeted by businesses. However, differences in levels of growth mean that some higher-growth countries may prove more profitable for businesses.

    Targeting differences

    While the N11 countries share certain characteristics, they are not at the same level of economic development so consumer-focused businesses must target these markets in different ways:

    The N11 countries can be categorised in two different ways: developing economies and newly industrialised economies. These are both 'emerging economies', but the latter have greater industrial capacity and are typically beginning to export heavy manufactured or refined products, while the former are still largely reliant on primary exports, with some industrial capacity. Typically, developing economies have lower standards of living than newly industrialised economies; Of the N11 countries, Bangladesh, Iran, Nigeria, Pakistan and Vietnam can be categorised as developing economies, while all the others except South Korea can be categorised as newly industrialised economies. South Korea is the only N11 economy that could be categorised as a developed economy, owing to its high level of industrialisation and relatively stable macroeconomic fundamentals; For example, South Korea is a predominantly technological state, exporting manufactured goods and services expertise. By contrast, Bangladesh is an exporter of primary goods while Nigeria is an oil exporter and an exporter of lower-level manufactured goods; In 2007, GDP per capita (purchasing price parity; figures adjusted for currency fluctuations) was the highest in South Korea, which has the most skilled and well-paid population, with the population being significantly smaller than most of those of its N11 peers. Nigeria had the lowest GDP per capita in 2007, at International $1,328, owing in part to a lower skilled but larger population, but also the significantly lower level of development in the country;   GDP per capita in N11 countries: 2007 (International $, PPP) Source: Euromonitor International from IMF Sales of high-end consumer goods are therefore likely to be higher in a higher income country such as South Korea, while a lower income N11 state may be more suitable for targeting more basic consumer durables.

    Consumer incomes in N11 countries are not necessarily comparable, but are at different levels and will grow by varying rates in the long term. This allows international businesses to target these markets for different products.

    N11 business environments

    The N11 countries are also different in their business environments, affecting their relative attractiveness as an investment destination:

    South Korea was ranked 30th out of 178 countries in the World Bank's 2007 Ease of Doing Business survey, the highest of the N11 countries. This is due to its well-regulated tax and investment code, heavily influenced by the US model, and the adherence of state and financial institutions to this code; Iran is ranked the lowest at 135th. This reflects its authoritarian state-owned business environment, which in many cases actively deters foreign investors. In other cases, the regulatory environment is opaque and arbitrary, offering few incentives for investment; In 2006, Turkey received the greatest amount of foreign direct investment of the N11 countries, at US$20.1 billion. This reflected its unique role as a bridge between Europe and the Middle East, and its consequent position as an export and re-export hub; By contrast, Iran received the least foreign direct investment, at US$901 million, indicating its investor unfriendly business environment and also the economic sanctions imposed on it by the USA.

    Business environment is a major contributing factor for potential growth, since investors can easily choose to invest elsewhere if operating environments are too difficult, restricting the potential for wage and job growth in those countries.

    Potential drawbacks

    While the N11 countries have significant growth potential, there are also factors that could hinder them from following the BRIC growth path:

    Shifts in global commodity prices will affect the N11 producers of these commodities. For example, all except South Korea are oil producers, although only Mexico and Iran are consistent net oil exporters. Accordingly, high oil prices (with oil touching US$100 per barrel in January 2008) will benefit Mexico and Iran in particular, although the other producers will also benefit, since their domestic supply will limit the amount of imported oil required, and hence a higher import cost; Domestic political events may also restrict growth prospects. For example, ongoing political instability in Pakistan and Bangladesh may deter investment, while the activities of terrorist groups in Indonesia, the Philippines, Nigeria and Turkey could also act as a disincentive for growth.

    Both global market moves, particularly of export commodities, and the domestic political situation could act to counteract the investment incentives offered by these countries. This would limit the potential for economic growth, with correspondingly negative implications for consumer spending growth.

    Future scenarios

    Both domestic and international factors will affect growth prospects for the N11 countries going forward:

    Demand from key export markets will determine economic growth. For the N11 countries, the USA and China are the main export markets. Although US GDP growth is forecast to reach only 1.9% year-on-year in 2008 owing to ongoing concerns about poor credit, China's economy will grow by 10%; Those countries that are most stable – whether via democracy or dictatorship – will have better prospects for consistent growth. These include South Korea, Vietnam, Mexico and Egypt; A key factor for Iran will be the continuation of economic sanctions by the USA, which would curtail

    Author: Media Eghbal

  • JP Morgan: Stop Freaking Out, The UAE Can Easily Save Dubai

    The Business Insider, pred 244 dnevi | Komentar

    Kian Abouhossein at J.P. Morgan delivers some excellent insight into the Dubai crisis. The wealthy UAW will be able to easily bail out Dubai if need be, this time. It just might not be so optimistic to do so in the future.

    We are less concerned for global banks about Dubai World’s direct $59bn outstanding debt exposure with $4.3bn due to mature in Dec-09 and a further $4.9bn in 1Q10, considering “only” $13bn of syndicated loans across global banking sector based on Dealogic data. Assuming a 10% “hold” strategy, the most exposed banks would be RBS with $0.23bn, DB and CS with $0.17bn each.

    ...

    The view from our MENA team is that this event reflects cash flow challenges rather than refinancing ability. They believe that obligations on Dubai World and its property unit Nakheel PJSC are likely to be fulfilled at the new May 2010 earliest repayment date, and that Dubai should be eventually be able to fulfill its debt obligations maturing in the short-term ($4bn in Dec-09, relating to Dubai World, and $9 to $10 in 2010) with continued Abu Dhabi support. Abu Dhabi is strong financially with fiscal and current account surpluses, ~$150bn in FX reserves and a ~$300bn sovereign wealth fund. However it seems that Abu Dhabi will no longer be happy to underwrite all debt, and rather will differentiate more strongly between supporting Dubai's strategically important assets (such as DEWA, and Dubai Ports), and the non strategic assets – hence the concurrent timing of the Dubai World debt restructure and the Abu Dhabi underwritten government of Dubai debt raising.

    Here's one rough measure of relative bank exposure to Dubai, based on Dubai World syndicated loans since 2007. Overall, JP Morgan believes the exposures are relatively small compared with the major banks involved.

    Here's probably a better estimate of relative exposure, by loans made to the UAE as a whole. The amount of direct loan exposure to Dubai specifically, within this UAE-wide figure, are apparently very difficult to know.

    Conclusions for some of the major banks exposed:

    ...

    Overall we would argue the UAE direct loan exposure risk is to some extent over-discounted within global banks except for some selective banks. In terms of spillover effect there is a larger concern for IBs considering mark-to-market risk exposure as well as IB revenue exposure to EM, in our view. Current events considered support of our preference for quality credit exposed banks over IBs as discussed in our report “Switching preference from IBs to Credit banks on regulatory changes” 9 Sept 09. Our top picks remain: SocGen, Unicredit, BBVA, DnBNor, NBG and HSBC.

    (Via JP Morgan, Kian Abouhossein, "UAE - Exposure at Risk analysis", 27 November 2009)

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  • Where Tech Keeps Booming ...

    Miki, pred 246 dnevi | Komentar

    'There are more new innovative ideas . . . coming out of Israel than there are out in [Silicon] Valley right now. And it doesn't slow during economic downturns." The authors of "Start-Up Nation," Dan Senor and Saul Singer, are quoting an executive at British Telecom, but they could just as easily be quoting an executive at Intel, which last year opened a $3.5 billion factory in Kiryat Gat, an hour south of Tel Aviv, to make sophisticated 45-nanometer chips; or Warren Buffett, who in 2006 paid $4 billion for four-fifths of an Israeli firm that makes high-tech cutting tools for cars and planes; or John Chambers, Cisco's chief executive, who has bought nine Israeli start-ups; or Steve Ballmer, who calls Microsoft "as much an Israeli company as an American company" because of the importance of its Israeli technologists. "Google, Cisco, Microsoft, Intel, eBay . . . ," says one of eBay's executives. "The best-kept secret is that we all live and die by the work of our Israeli teams." Israel is the world's techno-nation. Civilian research-and-development expenditures run 4.5% of the gross domestic product—half-again the level of the U.S., Germany or South Korea—and venture-capital investment per capita is 2½ times that of the U.S. and six times that of the United Kingdom. Even in absolute terms, Israel has only the U.S.—with more than 40 times the population—as a challenger. As Messrs. Senor and Singer write: "Israel—a country of just 7.1 million people—attracted close to $2 billion in venture capital [in 2008], as much as flowed to the U.K.'s 61 million citizens or the 145 million people living in Germany and France combined." At the start of 2009, some 63 Israeli companies were listed on the Nasdaq, more than those of any other foreign country. Among the Israeli firms: Teva Pharmaceuticals, the world's largest generic drug maker, with a market cap of $48 billion; and Check Point Software Technologies, with a market cap of $7 billion.

  • Accel Keeps the Hits Coming With AdMob, Playfish - Digits - WSJ

    Miki, pred 261 dnevi | Komentar

    Accel Partners is making other venture capital firms look plain silly. Playfish Playfish’s Bowling Buddies videogame At a time when VCs have struggled to sell their portfolio companies or bring them public, Accel is the backer of two companies — mobile advertising company AdMob and videogames developer Playfish — that announced today they have been acquired for more than $1 billion. Even more impressive: Accel is bringing home killer returns after only a year or two of investing in these companies. Palo Alto, Calif.-based Accel, a tech investor best known for its early bets on companies like Facebook, JBoss and MetroPCS, first invested in AdMob in 2007 by leading a $15 million round that included Sequoia Capital. It followed that up by participating in a $28 million round in 2008 with Sequoia, Draper Fisher Jurvetson and Northgate Capital Group. Now those investors will get $750 million in stock from Google. Only Amazon’s buy of Zappos for $847 million is a larger acquisition of a venture-backed company this year; that deal, announced in July, closed last week. With Playfish, Accel invested $1 million in 2008 and then co-led a $17 million round with Index Ventures a few months later. Electronic Arts is paying $275 million upfront for Playfish, plus $25 million in equity retention arrangements and up to $100 million of additional cash if the company reaches certain milestones by the end of 2011. You might also remember three other big acquisitions of companies on Accel’s tab recently: In August, SpringSource Global sold to VMware for $420 million barely two years after taking its first round of venture capital; research and development company BBN Technologies agreed in September to sell to Raytheon for $350 million; and wireless-networking company WiChorus agreed last month to sell to Tellabs for $180 million in cash after raising $43 million from Accel and others.

  • JP Morgan: Media Buyers Expect Ad Spend To Rise At Least 5 Percent In H209

    Miki, pred 294 dnevi | Komentar

    While the 5.3 percent decline in online ad spend recorded by the Interactive Advertising Bureau this week served as an unnecessary reminder of how bad things were in the first six months of the year, a survey of media buyers by JP Morgan analyst Imran Khan offers some hope for right now. I n a poll of 20 media buyers who manage annual advertising budgets of $1.6 billion—or an average of $81 million per participant—45 percent believe ad spend in the latter six months of ‘09 will be up between 5- and 9 percent from h109 levels; an additional 15 percent are even more optimistic, expecting an upside of 10- to 14 percent over the first half of the year. Just 10 percent anticipate the ad spend situation to worsen by the end of the year. But the lag in spending from January to June has done its damage for this year, as 40 percent of the buyers surveyed are projecting overall 2009 expenditures to be flat compared to 2008. The really bad news this year is in the area of pricing. Media buyers, perhaps reflecting their natural biases, overwhelmingly say they will pay less for nearly every ad category. For example, for search advertising, 65 percent say they will pay less in 2009 than 2008, while 80 percent say display prices will be down this year as well. About 35 percent said they would pay higher prices this year for search ads and for cable TV versus ‘08—the highest percentages of any other segment. As for 2010, media buyers are sharply divided about how much a recovery the ad industry will see. About 40 percent expect spending will continue to be flat in 2010, while 50 percent say it’ll be up greater than 5 percent.

  • Top 100 Global Venture Capitalists

    Miki, pred 318 dnevi | Komentar

    After long research, Red Herring is releasing its Top 100 Global Venture Capitalists list. This comes as economies have radically changed across the globe, seriously challenging the asset class. Nevertheless, the facts remain: higher relative returns, hundreds of thousands of jobs created, and super-sized brands such as Facebook and Twitter speak volumes. Not to mention the world has been improved through advances in biotech and cleantech. Yet not all venture capital at work has held its side of the bargain and returned sufficient money to its backers, the limited partners. For the LPs, those who manage vast pools of money from pensions and other sources, 2007-2009 will be remembered as the dark years. Fortunately, the Top 100 Global Venture Capitalists represent the best of the group. This group sends checks to their limited partners and holds substantive unrealized value in their portfolios, just waiting for a better exit market.

  • Europe Gets Another Fund As Ariadne Slaps Down $32m

    TechCrunch, pred 325 dnevi | Komentar

    It looks at first glance like Michael Birch and Brent Hoberman’s PROfounders Capital has a new and unexpected bit of competition in the shape of “online Dragon” Julie Meyer from Ariadne Capital.

    The latter has just announced a brand-new $32 million (£20m) fund, the Ariadne Capital Entrepreneurs Fund, that aims to invest in early-stage companies. But that may be jumping the gun.

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    TechCrunch50 Conference 2009: September 14-15, 2009, San Francisco

  • Krugman: How Did Economists Get It So Wrong?

    Matej, pred 329 dnevi | Komentar

    It’s hard to believe now, but not long ago economists were congratulating themselves over the success of their field. Those successes — or so they believed — were both theoretical and practical, leading to a golden era for the profession.

  • Online Ad Marketplace TRAFFIQ Scores $10 Million in Series B Funding

    Miki, pred 358 dnevi | Komentar

    Online advertising marketplace TRAFFIQ today announced it has closed a $10 million Series B round of venture funding from Grotech Ventures, Greenhill SAVP and Court Square Ventures. The New York-based company, which operates a management platform designed to connect buyers and sellers of online media, had previously raised $7 million from the latter investor and says the extra capital will be primarily used to enhance its TRAFFIQ platform and accelerate the company’s sales and marketing efforts.

    TRAFFIQ positions itself as different from ad networks or exchanges, in the sense that they offer an end-to-end platform that is capable of consolidating planning, RFP distribution, order execution, optimization and billing. Its solution is targeted primarily to larger ad agencies like Havas Digital, IMRE and AdStrategies and publishers like WhitePages.com, Scripps Network and ContextWeb. The service also boasts the inclusiong of reporting and free ad serving tools, as well as integration with common third-party ad-serving technologies like Atlas and DoubleClick’s DART.

  • THEORY OF GAMES AND ECONOMIC MISBEHAVIOR by George Dyson

    Matej, pred 361 dnevi | Komentar

    "I refuse to accept however, the stupidity of the Stock Exchange boys, as an explanation of the trend of stocks," wrote John von Neumann to Stanislaw Ulam, on December 9, 1939. "Those boys are stupid alright, but there must be an explanation of what happens, which makes no use of this fact." 1 This question led von Neumann (in collaboration with Oskar Morgenstern) to his monumental Theory of Games and Economic Behavior, demonstrating how a reliable economy can be constructed out of unreliable parts.

  • M&A Activity Heats Up In July To $9.6 Billion

    TechCrunch, pred 1 letom | Komentar

    Whether it’s a sign of economic recovery or just investment bankers getting ready to take off the month of August, there’s been a lot acquisition activity lately. In the last week alone, IBM purchased SPSS for $1.2 billion, Amazon bought Zappos for $928 million, Sprint paid $483 million for Virgin Mobile, AdKnowledge paid $50 million for Super Rewards, and Yahoo picked up Xoopit for $20 million.

    So far in July, the value of the acquisitions we track on CrunchBase totals $9.6 billion, which is nearly three times more M&A activity than the $2.6 billion we tracked in June. M&A exits already started to perk up in the second quarter , according to our latest CrunchBase report. But the increased deal flow on July suggests that corporate buyers are opening up their purse strings even more while acquisition prices are still relatively cheap.

    But the bargains might not last. Already, the median acquisition price leaped up to $260 million in July, from $22 million in June. Most of that jump was due to some very big transactions such as the ones listed above, as well as Agilent’s $1.5 billion purchase of Varian and Bristol-Myers’ $2.1 billion acquisition of Medarex. Still, you know what they say about rising tides . . .

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  • Traders Profit With Computers Set at High Speed

    Matej, pred 1 letom | Komentar

    It is the hot new thing on Wall Street, a way for a handful of traders to master the stock market, peek at investors’ orders and, critics say, even subtly manipulate share prices. It is called high-frequency trading — and it is suddenly one of the most talked-about and mysterious forces in the markets.