Asia in 2020

[Musicwhiz]

This is the first of a 4-part series on Asia 2020, and I think it's very useful to understand the trends as most of us are investing in Singapore companies with wide exposure to Asia (e.g. China).

The Straits Times
Oct 16, 2011
Asia in 2020: 5 things you may not know

The year 2020 may have once sounded more like the stuff of science fiction novels. But it is only nine years away now. In a new report, Imagining Asia 2020, a team of researchers and analysts from DBS Bank look into their crystal balls to see what 2020 might hold for Asia. Robin Chan takes a peek.

1 GDP growth: Asia will surpass the US in economic size

Asia has long been the fastest-growing region in the world.

And last year, it overtook the United States as the main driver of global growth, generating more new demand, the DBS report said.

Said Mr David Carbon, managing director of economic and currency research at DBS: 'This is the biggest structural change going on in the global economy today.

'Asia has been getting a little bigger and bigger, and is now at the point where it is big enough where it matters. Five years ago, 10 years ago, 15 years ago, it was not big enough to matter, not big enough to drive its own recovery, but today it is.'

Asia is growing, but just how fast and how big will it get?

DBS said that the Asia 10 - China, Hong Kong, Taiwan, South Korea, Singapore, Malaysia, Indonesia, Thailand, the Philippines and India - will have a combined gross domestic product (GDP) of US$22.4 trillion (S$28.6 trillion) in 2020, some 17 per cent larger than the US economy's.

By 2016, Asia will have caught up in size with the US.

The speed of growth has been simply breathtaking. In 2000, Asia was only 40 per cent the size of the US. By last year, it was 80 per cent.

The Asia growth story is fact, not fiction.

China will contribute 64 per cent of this growth over the next nine years, and India 17 per cent, making them the two most important drivers of growth by far.

Average growth in Asia last year was about 10 per cent. By 2020, it will slow to about 5 per cent to 5.5 per cent, Mr Carbon said. There are risks to this growth, namely if there is a shock to China, say analysts. And while Asia will be economically large, it may not be united.

Singapore Management University assistant professor of economics Davin Chor said that diverging political interests may lead to political unease, and even geopolitical instability, if Asian governments do not play their cards right. And this could undermine the positive economic climate.

Asian economies could also fall into a 'middle-income trap' warned Mr Carbon, if they become too enamoured with their wealth.

'The middle-income trap is the idea that you start out at a low growth rate, do the right things... and grow very fast for a while, and everyone likes it very much. But some, instead of moving up, they try to protect what they have. Once you start protecting things, growth slows. That is the middle-income trap. You start looking backwards instead of looking forward.'

But Mr Carbon said it is unlikely that it will happen.

2 People power: Asia will add another US to its population

Imagine a whole other US in Asia. Well, based on just population growth, that will soon be a reality.

By 2020, Asia will have added another 290 million people, or almost the entire population of the US.

'That is 10 times more than the US population is going to grow by. For every single new person we have in the US by 2020, we are going to have 10 new people in Asia,' said Mr Carbon.

Not surprisingly, 85 per cent of the population will be Chinese and Indian.

'Population growth, however, is no guarantee of economic success and GDP growth,' DBS' report noted. 'It will not ensure these billions in Asia will live and eat well, get a good education and own a car.'

One key factor will be fertility rates. As the population grows, incomes of Asians will generally grow faster if fertility rates decline.

But the trends will be different across Asia. Countries such as Singapore, China, Vietnam and Thailand will see increasingly higher dependency ratios, said DBS. This means fewer and fewer working-age adults, compared with dependent children and the elderly.

'These countries, with low dependency ratios, are at the tail end of their 'demographic windows of opportunity', which are projected to close by 2015,' the report said.

After this, dependency ratios will rise, as more people retire.

Countries like India, Indonesia and Malaysia, however, will see their dependency ratios fall over the next 20 years or so, as more young people reach working age.

'This bodes well for emerging Asia, as they find themselves replicating the same virtuous pattern of declining fertility and increasing income - attributes that demographers have pinpointed to be responsible for the 'East Asian miracle',' the report said.

Mr Manu Bhaskaran, chief executive of Centennial Asia Advisors and vice-president of the Economic Society of Singapore, said: 'If the population growth occurs in countries with endemic political and economic problems, these problems could perhaps even get worse.

'But if the growth is in rapidly growing economies, which can provide good jobs for the additions to the workforce, then the impact is likely to be positive.'

3 Urbanisation: China will have over 100 cities with more than a million people each

China will have seven megacities by 2020. These are cities with a population of over eight million each.

But it will also have a whopping 131 other cities with populations of more than a million people each.

In South-east Asia, over 20 secondary cities across Indonesia, the Philippines, Thailand, Vietnam and Malaysia will also be home to over a million people in 2020, said DBS.

The demands for infrastructure development and urbanisation are therefore immense. 'Urban centres offer economies of scale and make it more efficient to provide services such as education, health care, clean water and safe sanitation,' said the DBS report.

'Better access to such services improves the levels of health and education of the population, as well as its productivity.

'A skilled labour force attracts investments that generate more employment and prosperity, setting off a virtuous circle of economic gain.'

What this means is that these areas will need more roads, water, electricity, railway lines, ports and airports - all of which will require significant investment spending from both the private and public sectors.

Urbanisation will also drive housing demand from lower middle-income and middle-income families, which will bode well for private developers and the banks that finance them.

However, DBS predicts that many cities and towns in South-east Asia will still face a substantial housing shortage for the low- and middle-income groups.

'The needs of Asia's middle class present a wide range of lucrative investment opportunities for savvy investors who understand long-term trends and who have a nose for opportunity,' the report said.

4 Hey big spender: Asia will be the mighty consumer

Americans are not the only big eaters. Asia is expected to at least double its current level of consumption to US$8.6 trillion by 2020, and will consume 80 per cent as much food as the US.

It will more than triple the growth rate of private consumption of the US over the next 10 years, DBS said.

Food will be a large part of that spending. One out of every four dollars spent by each household will be on food.

China will spend US$1.48 trillion on food, and Indonesia will spend US$339 billion.

This means that Indonesia, with its quarter of a billion people, will account for 56 per cent of South-east Asian food demand, said DBS.

The way food is being consumed will also change, as disposable incomes rise and more live in cities.

Mass grocery retail spending in the Asean-5 (Singapore, Indonesia, Thailand, Malaysia and the Philippines) is forecast to grow over 200 per cent from current levels to US$180 billion.

Medical spending per person is also expected to more than double between now and 2020, bringing Asia on a par with the US, while Asia will account for 78 per cent of the world's four largest economies' energy demand.

5 Wealth creation: Asian incomes have lots of room to rise

Between the mid-1960s and today, income levels in most Asian nations have grown by five to eight times.

But most of Asia is still far behind developed Western nations such as the US in terms of income levels.

Singapore is the exception, and is expected to surpass the US' per capita income level by 2020 and end up about 25 per cent higher.

Based on an average 6 per cent growth rate, it would take Hong Kong roughly six years to 'catch up' to the current US and Singapore level.

In other words, Hong Kong is six years behind. South Korea is 13 years behind; Taiwan, 14 years; China, 35 years; and India, 51 years.

So while income levels have grown rapidly in Asia, there is still a lot of catching up to be done, and it means 'fast growth in Asia should be able to continue for a long time', noted DBS.

Mr Carbon said that Asian economies have to be mindful of externalities, like pollution and inequality. 'But I would never try to argue that rising per capita incomes is a bad thing,' he said.

'I think this story is too powerful. I don't think anyone would ever argue that global income is becoming less equal. You have a huge chunk of the world where incomes are getting closer and closer to the highest incomes in the world. That is a big conversion in equality, and to me that is a good thing.'

chanckr@sph.com.sg

This is the first in a four-part series.

[Musicwhiz]

The Straits Times
Oct 23, 2011
The rise of Asia's middle class
Asia is rising but what will this mean for its demand for goods and services? Robin Chan looks at the changes expected in the region that is projected to have half of the world's middle class by 2020.

Companies rub their hands with glee when they think of Asian consumers.

Dr Bala Shankar, an adjunct professor at Singapore Management University, recently wrote: 'Asia is home to nearly four billion consumers, more than half the world. If the predictions that China and India will overtake many of the Western nations in GDP terms come true, it could be the largest bonanza for the marketers.'

The key is the rising middle class.

While there is no standard definition or measurement of the middle class in Asia, whether it is by income or consumption, whatever it is, the figures show the middle class is growing, and fast.

In its report, Imagining Asia 2020, DBS Bank defines the middle income group as those individuals who spend more than US$10 (S$13) a day.

By that measure alone, Asia today has a middle class of 525 million people. They make up 28 per cent of the world's middle class, said DBS.

This is projected to expand significantly to an incredible 1.74 billion people over the next 10 years.

They will then make up half of the middle class population in the world.

It's not just a China and India story but one of South-east Asia too.

'Over the next nine years, Malaysia and Thailand will see a significant increase in the number of people who will spend more than US$10 a day,' DBS said.

The growth of the upper middle class in China will surge from 80million in 2010 to 208 million by 2020.

As Asia's middle class grows, so will its demand for goods and services.

'The rising middle class will be a significant factor in reshaping national economies. They will be an influential and profitable market segment thanks to their size and emerging buying power,' noted DBS.

No wonder consumer giants like Procter & Gamble and Unilever have set up headquarters in Singapore to be closer to the Asian market.

They also have innovation centres to provide products specifically for different Asian tastes and preferences.

An example Economic Development Board chairman Leo Yip likes to cite is that the thickness of Asian hair is not the same as that of European hair, so shampoos sold in Asia must be made with different levels of conditioner.

According to DBS, global demand from the middle class will expand from US$21 trillion to US$35 trillion by 2020.

Over 70 per cent of this growth in demand will come from Asia.

How will this burgeoning middle class spend its money?

Middle class families generally have fewer children and spend more on health care, nutrition and education than the poor do, according to DBS.

Asia's middle class will be similar, influencing how their new money will be spent.

'Having fewer children would give middle class parents greater ability to afford quality education for their children,' said the DBS report.

'More women would also be more likely to rejoin the workforce. Additionally, families would have more opportunities for savings and personal consumption.'

Durable goods

For a start, there will be much more demand for durable goods such as refrigerators, cars, television sets and mobile phones.

Just take a look at these numbers for the mobile phone market: China already has some 780 million mobile phone subscribers. In India, there has been a significant growth of 66 per cent in the number of mobile phone users from 2000 to 2010.

But these figures represent only about half of the population in these countries, which means China and India still have substantially untapped markets.

While the middle class is growing, the more impressive expansion will come from the income groups of those earning between US$4 and US$10 a day, especially in Indo-nesia, Vietnam, India and China, said DBS.

They will also demand goods and services but at a cheaper price, which will in turn drive the search for innovative solutions to achieve this.

Godrej, an Indian manufacturer, is one such company, selling refrigerators for just US$70.

Other companies, such as Unilever, sell 10-cent shampoo and conditioners.

Education and health care

It is not just demand for goods that will rise. The middle class will also be willing to spend more on important services such as education and health care.

DBS said the middle class in Thailand spends about 4 per cent of its income on these two services. This is more than double what the lower-income group is willing and able to spend.

The Chinese spend the higher proportion of their income on education and health care.

This will in turn drive demand for infrastructure - more schools and hospitals.

Cars and property

China's car market is already the largest in the world, overtaking the US' two years ago.

An incredible 18 million cars were sold in China last year. DBS forecasts car ownership to grow further as incomes rise, more roads are built and car makers aggressively roll out new designs for the Chinese market.

By 2020, two out of every 10 Chinese will own a car.

This means that total sales will surpass 30 million by 2020 at a growth rate of 5.3 per cent.

In South-east Asia, car demand is expected to grow at an even faster pace. DBS expects car ownership to grow from the current 9 per cent pace to about 10.5 per cent, and at a similar rate each year from 2010 to 2020.

Housing demand in Asia is forecast to grow from a market value of US$694 billion last year, to US$1.1trillion by 2020, said DBS.

It calculated that 16.5 million property deals will be transacted in China, Indonesia, Hong Kong, Singapore, Thailand and Malaysia.

The populations of these places combined make up a quarter of the world's total population.

These figures will be music to the ears of property developers, who will be able to offer a wider supply of properties catering to different income groups.

'The pace and pattern of this growth will vary according to market development and demographics in each country,' said DBS.

In China, it will be driven by low ownership levels, urbanisation and a high incidence of people in the home-owning age range.

In countries such as Indonesia and Malaysia, it will be sheer demand for housing, as people under 25 make up about 46 per cent of the population and will soon progress to the home ownership age.

Energy and commodities

China today consumes four billion barrels of oil a year of the 6.9 billion barrels consumed in Asia a year. This is second only to the US' seven billion barrels each year.

By 2020, China is expected to raise its consumption to 4.3 billion barrels a year.

By 2035, it will account for more than a fifth of total global oil demand, up from 17 per cent today.

With energy-hungry China and India, coal demand is also expected to remain high, and grow at an 8 per cent annual rate until 2020, said DBS.

But don't expect Asia to become much greener. Renewable energy is unlikely to be able to make up for much energy demand by 2020. Coal power plants are still estimated to account for more than 70 per cent of power generation, said DBS.

Palm oil and rubber will also be in hot demand in Asia.

'It will be home to 86.3 per cent of the 81.7 million tons of global palm oil supply, and 95 per cent of the 15.5 million tons of global natural rubber supply over the next eight years,' said DBS.

chanckr@sph.com.sg

This is the second in a four-part series.

[touzi]

In its report, Imagining Asia 2020, DBS Bank defines the middle income group as those individuals who spend more than US$10 (S$13) a day.

I failed to meet the grade except on some weekends. Have to be contented with being part of the lower income group.

[Musicwhiz]

This is Part 3 of a 4-part series!

The Straits Times
Oct 30, 2011
2020 VISION
5 sectors to watch in the decade ahead
Asia is rising but which are the growth sectors? In a new report, Imagining Asia 2020, a team of researchers and analysts from DBS Bank makes its predictions. Jonathan Kwok takes a peek.

Amid the uncertain financial and economic outlook, analysts have been urging investors to take a long-term view of companies.

Asia presents growth opportunities that will remain solid despite short-term upheaval, they maintain.

'Asia, excluding Japan, with its sheer size, youthful population, and financial resources, will be critical to any new balance in global economies and even politics,' said Mr Lim Say Boon, chief investment officer of DBS Bank's wealth management arm, in the bank's report titled Imagining Asia 2020.

The report forecasts growth areas in the region from now till the year 2020.

Asia's 'yet higher' consumption growth will help solve the world's problem of a lack of demand, said Mr Lim, especially since the West 'appears to have hit a peak in its capacity to leverage and spend'.

DBS reckons that over the coming decade, there will be opportunities in housing, energy, health care, agri-businesses and travel, as Asians loosen their purse strings and increase spending.

1 Housing

Population and economic growth, urbanisation and infrastructure development will raise the demand for housing. Meanwhile, rising affluence will lead buyers to seek better quality housing.

Asians spent US$695 billion (S$875 billion) on housing last year, and by 2020 the annual figure should rise to US$1.11 trillion, estimates DBS. This assumes the US dollar remains constant, and will represent a 4.8 per cent growth every year.

The pace and pattern of this growth will vary according to developments and demographics in each country.

Volume growth will be the main driver in Indonesia and Malaysia in view of the fact that people under 25 years old make up almost half of the populations, said DBS.

In China, low ownership levels, urbanisation and the fact that many people are of home-owning age will ensure robust housing demand.

With the notable exception of Singapore, the provision of housing is left largely to the private sector in Asia, with listed developers controlling 50 per cent to 65 per cent of the market share.

'With regulators trying their best to ensure a stable market, this industry will be sustainable and resilient,' said property developer CapitaLand's chief executive Liew Mun Leong.

'We want to continue to be a part of the Asia growth story... In particular, urbanisation will trigger increased demand for housing in countries such as China and Vietnam.'

CapitaLand will build tens of thousands of homes in both countries over the next few years.

2 Energy

Demand for energy is expected to grow rapidly, across all segments of the value chain.

The upstream segment includes oil - expected to remain the dominant fuel source - as well as coal and gas, also mooted to play key roles for Asia.

The growth in oil demand is expected to be led by Indonesia, China, Thailand and India. Each of these countries is expected to consume at least 3 per cent more oil every year up till 2020.

In this space, rig-builders such as Singapore's Sembcorp Marine and Keppel Corp can stand to benefit. Both these firms sell rigs to companies that drill for oil.

Companies are also investing in downstream services, like electricity generation and distribution, in anticipation of rising demand.

Sembcorp Marine's parent company Sembcorp Industries runs power plants, and Keppel Corp also has a power generation arm.

A Keppel spokesman told The Sunday Times that the firm is expanding its natural gas-fired cogeneration plant on Jurong Island.

Keppel, which has 20 yards in regions including the Asia-Pacific, Gulf of Mexico, Caspian Sea, Middle East and the North Sea, is also building rigs and other support vessels for its customers, with demand going strong.

'Besides international oil and gas players, national oil companies in Asia are expanding their exploration and production expenditures to meet this demand (for oil),' said the Keppel spokesman.

Another player in the energy space is Malaysia-listed infrastructure group YTL Corp, which owns Singapore power generation firm PowerSeraya as well as power stations in Malaysia.

Tan Sri Francis Yeoh, managing director of YTL Corp, said that emerging economies in the Asian region have continued their strong growth momentum, despite volatile global economic conditions. He is thus 'cautiously positive' about the prospects for the Asian energy industry.

3 Health care

DBS expects medical expenditure per person in Asia to more than double between now and 2020 to almost equal levels with the United States.

The increased spending will come as Asians enjoy longer life spans and deeper pockets.

'We are one of the beneficiaries of this increased demand,' said a spokesman from Raffles Medical Group.

'Aside from the traditional countries like Indonesia, we are seeing more patients from Vietnam, Russia, China, Bangladesh and even places like Papua New Guinea. Popular specialities are oncology, cardiology, women's health, orthopaedics and health screening.'

Other than Singapore, Raffles Medical is in mainland China and Hong Kong.

Health Management International (HMI), also listed in Singapore, has two hospitals in Malaysia and plans to expand both to cater to the growing number of patients.

It also has 20 patient representative offices in Indonesia, Cambodia, Malaysia and Singapore to attract patients and medical tourists to its hospitals.

'We are confident about the growth prospects for the health- care industry in Asia,' said Ms Chin Wei Jia, group general manager at HMI. 'In particular, we are excited about the Malaysian health-care market.'

4 Agri-business

'There will be plenty of people looking for a good meal in Asia, or rather more people being able to afford to do so,' said the DBS report.

Demand for food from the region is expected to more than double by 2020 to nearly US$3 trillion per year, said DBS.

But even as Asia - and the rest of the world - guzzle more food, supply has not been keeping up, leading to rising prices, which can potentially benefit companies.

Over the past year, the prices of agricultural commodities have already outperformed industrial metals and stock indexes such as the Dow Jones Industrial Average and Straits Times Index, though precious metals have fared better.

Companies that can benefit include those in palm oil and rubber, two commodities that rely on Asia to produce the vast majority of global supply.

Palm oil companies like Golden Agri-Resources, Wilmar International, Indofood Agri Resources, First Resources and Kencana Agri are listed in Singapore.

They run plantations, and many are also involved in related activities like processing. Sri Trang Agro-Industry, also listed here, deals in parts of the rubber value chain.

Olam International sells 20 agri-products, including cashew, coffee, and cotton. It has expanded across the value chain, buying plantations and farms, as well as selectively expanding into mid-stream and downstream operations like manufacturing food ingredients and packaged foods.

5 Travel and tourism

The newly-wealthy people in Asia like to travel, and a lot of them travel domestically, such as within China, using railways and staying in motels or hotels, said DBS head of wealth management Tan Su Shan in the report.

She noted that businesses near the major connection points - like train stations and airports - are also benefiting.

While the emerging middle class is not spending on high-end luxury, it is 'massive' and it is 'high cash-flow generating', she noted.

Travellers from other Asian countries, and from outside Asia, could also boost the region's tourism sector.

According to the World Tourism Organisation, China is now the third most-visited country in the world, behind France and the US. Malaysia is also popular, coming in at No. 9.

In terms of individual cities, Singapore, Kuala Lumpur and Hong Kong are popular destinations.

jonkwok@sph.com.sg

This is the third in a four-part series.

[Musicwhiz]

The Straits Times
Nov 6, 2011
Riding Asia's growth over the next decade
A new report from DBS Bank, titled Imagining Asia 2020, details how Asia will grow over the next decade. In an interview with Yasmine Yahya, DBS strategists explain how investors can ride this growth.

The ongoing debt crisis in the euro zone and the unemployment and debt problems in the United States have shown the world that Asia is really where the money is.

After all, Asia has grown at a remarkable speed over the past decade, and is expected to continue to do so in the next 10 years.

DBS said in its report that the Asia 10 - China, Hong Kong, Taiwan, South Korea, Singapore, Malaysia, Indonesia, Thailand, the Philippines and India - will have a combined gross domestic product of US$22.4 trillion (S$28.4 trillion) in 2020, some 17 per cent larger than the US economy's.

DBS' head of investment communications, Ms Mah Ching Cheng, told The Sunday Times that with selective long-term investments in certain stocks and bonds, investors could tap this growth for their own wealth creation.

Consumption

It is no secret that Asia's rapidly expanding middle class will lead to a boom in consumption over the next decade.

One way to tap this growth is by buying the stocks of listed palm oil and rubber producers.

'Of particular interest are the palm oil and natural rubber sectors, for which we believe Asia is key - both as a producer and consumer,' Ms Mah said.

'Demand growth in these two sectors is likely to be contributed mainly by China, India and Indo-nesia, accounting for around 40 per cent of the world's population.'

Global demand for palm oil and rubber is expected to match or exceed supply, and the annual sales value of these commodities has been forecast to double over the next eight years, she added.

Over the next eight years, supplies may become increasingly restricted due to erratic weather caused by global warming, rising biofuel demand on restrictions in carbon emissions, and the remo-val of farm subsidies due to Western governments' weak fiscal positions.

Another way to ride on the consumption trend is by picking up shares in automakers, said Ms Mah.

China's automobile industry has become the largest in the world in terms of sales volume, she noted, and is expected to notch a compounded annual growth rate (CAGR) of 5.3 per cent in the next decade.

In Indonesia, Malaysia and Thailand, demand for automobiles is expected to rise at a CAGR of 10.5 per cent in the next 10 years.

'With the region's political commitment to stimulate foreign investment flows, infrastructure development and job creation, the automotive industry should remain a good proxy to these countries' long-term economic potential,' Ms Mah said.

Housing

According to DBS, Asia will have added another 290 million people to its population by 2020. That's almost the entire population of the United States.

Naturally, housing will be in high demand amid this population boom, and residential developers are set to do very well.

'Growth dynamics vary according to stage of market development and demographics in each country,' Ms Mah noted.

'The major driver in Indonesia and Malaysia is volume growth in view of the young population, while in China and Thailand, low ownership levels and a young population median age also means robust consumption and demand for housing.'

Singapore is the only market where the Government, via the Housing Board, is its dominant provider, accounting for 80 to 85 per cent of the market, she said.

Home ownership is also high, and thus volume growth is likely to remain modest with demand drivers coming from new household formation as well as movement up the value chain.

Environmental solutions

Buy stocks of companies in the water or alternative energy business, especially those in Singapore and China, said Ms Mah.

In the long term, water companies will likely become yield rather than growth plays, she added.

'The majority of their revenue and net profit will come from operating projects with very steady cash flows to fund their construction work, while their exposure to desalination and recycled water projects should also increase.'

In the alternative energy space, continual improvements should be made in the basic design of both wind turbines and solar panels, with some of the lower value-added processes moving outside China.

'We think that in the next decade, China will produce 90 per cent of the world's solar panels and 50 per cent of the world's wind turbines.'

Coal

The regional coal sector can be viewed as a proxy for power generation demand in Asia, Ms Mah said.

Asia accounts for 65 per cent of world coal demand, with China and India accounting for 44 per cent and 13 per cent of consumption respectively.

DBS expects Asian coal demand to continue to grow at an average rate of 8 per cent a year up to 2020, reflecting the strong gross domestic product growth of China, India and other Asian countries like Indonesia, Malaysia and Vietnam.

'Given the promising sector outlook with resilient demand, and supply shortages due to sector consolidation and transportation bottlenecks, we expect coal miners to continue to enjoy strong pricing power and attractive earnings growth as a result of price of volume increases,' Ms Mah said.

Bonds

Bonds should have a place in every investor's portfolio, DBS strategists say. 'There are opportunities in both developed and emerging market bonds and there is a place in all portfolios for both categories of bonds,' said Ms Mah.

DBS' group head of wealth management Tan Su Shan said: 'The Asian debt market, particularly Asian corporate debt in local Asian currencies, has grown tremendously this year.

'This has provided ample opportunities for Singapore dollar, Chinese yuan and US dollar investors to invest in both investment grade and high yield Asian paper.'

yasminey@sph.com.sg

This is the last in a four-part series.

[setan]

If it become a reality, there will be a lot millionaire/billionaire created.

[brattzz]

soo err... 2014, 3 years on...

[brattzz]

"TOKYO: Singapore Prime Minister Lee Hsien Loong on Thursday (May 22) painted two possible scenarios Asia faces over the next two decades: One of a region at peace, with countries working together to advance shared interests, and another of a fractious Asia marked by territorial disputes and protectionism.

Speaking at the Nikkei Conference in Tokyo, Mr Lee highlighted how the interactions of three key countries – US, China and Japan – over the next 20 years will shape the future of the Asia-Pacific.

The US will remain the world’s pre-eminent superpower in 2034, Mr Lee said, while Japan "will still be one of the world’s largest economies, with great strengths in science and technology". But "the biggest change for Asia in the next 20 years will be the growth of China’s power and influence", he said.

SCENARIO 1: A PEACEFUL, INTEGRATED ASIA

The new strategic landscape in Asia will depend on how the three nations interact with one another, said the Singapore Prime Minister. Should the US and China relationship strengthen and the Japanese economy recover its confidence, the region will reap the benefits of peace and stability.

"One scenario is that Asia remains at peace, with countries working together to advance shared interests, while competing peacefully with one another," he said.

"A stable strategic environment will help foster regional economic cooperation. Greater economic interdependence will raise standards of living for all, and contribute to a peaceful region in a virtuous cycle."

In this scenario, members of the Association of South-East Asian Nations (ASEAN) will be able to "deepen their cooperation and integration" and remain "an effective neutral platform for major powers to engage one another".

SCENARIO 2: A RIVEN, FRACTIOUS ASIA

However, should the rapid growth of China force an imbalance in the region and in the US-China pivot, Asia "will be contemplating another, less benign scenario", one marked by territorial disputes and nationalist populism, Mr Lee said, citing maritime disputes in the East and South China Seas as well as the recent anti-China protests in Vietnam as examples.

In this scenario, ASEAN nations will be forced to choose sides, with South-East Asia becoming "a proxy battleground" for friction between the superpowers, he said.

"Such a strategic climate inevitably sets back economic integration. There are more trade disputes and currency wars and tit-for-tat protectionism. The result is less shared interest in one another’s success, more frictions and disputes, and fewer restraints on countries when things go wrong," he told the audience in Tokyo.

"Everyone loses in such a scenario."

KEY FACTORS

Two critical factors will play a large part in determining the region's fate over the next two decades, he said. First, US-China relations - "the most important bilateral relationship in the world", but one which can easily spiral out of control should a flashpoint escalate into violence.

Second, the uncertainty over the Korean peninsula. "Quite possibly the status quo will prevail, with repeated brinksmanship and occasional tensions, but hopefully no war. Even in the absence of a war, failure to denuclearise the Korean peninsula poses a continuing risk."

Mr Lee concluded his speech by calling the next 20 years a "historic opportunity" for Asia.

"I have described these uncertainties and scenarios vividly, to help us visualise how things could turn out. I am not predicting what will happen, but describing what may happen.

"Whatever the forces driving the politics and policies of each country, ultimately we share a common interest in peace and prosperity in Asia. All stakeholders big and small have a responsibility to make this vision come true.""

http://www.channelnewsasia.com/news/sing...16158.html

Asia in 2034!!

[Boon]

Economic shift to Asia 'biggest structural change'

Jonathan KwokThe Straits TimesThursday, Jun 26, 2014

The shift in economic activity from Europe and the United States to Asia is the "biggest structural change under way in the global economy today", said DBS chief economist David Carbon. Mr Carbon noted in a recent report that Asia's growth every few years is larger than Germany's entire economy, which at about US$3.4 trillion (S$4.3 trillion), is Europe's biggest economy.

"Since Lehman Brothers collapsed five years ago, Asia has added 1.25 Germanys to the world's economic map, right here in Asia," he noted. Much of the region's growth comes from China. But even with slower growth on the mainland, Asia now puts a Germany on the map every 3.5 years.

"The time it takes to do so shrinks every year," said Mr Carbon. "For the most part, it's brute-force growth - catch-up with the West after lagging for 150 years. But force is force and the shift in gravity that most denied just five years ago is bound to bring enormous change." Stretch this out over the long term and Asia will add three euro zones to the global economy over the next 25 years, he reckons. The euro zone's economy is worth about €9.5 trillion (S$16.1 trillion).

The shift in economic power will bring about changes, from the financial markets to the political realm. "Surely the global pecking order will change. Politics may drive economics in the short run but in the longer term, cause and effect are reversed," said Mr Carbon.

"Big structural changes in the global economy must bring big structural changes in the geopolitical order," he added, without elaborating. One major change could see the Chinese yuan supercede the United States dollar.

"China is already world's largest trader - imagine where it will be in 2039. Three additional euro zones makes it easier to appreciate that China doesn't just want a globalised yuan, it needs one. So does the rest of the world," said Mr Carbon. That could make the People's Bank of China the world's dominant central bank, where impacts from its policy decisions will be felt throughout the world.

Asian demand will also drive the price of oil and other energy sources. Energy demand has been falling in the US, Japan and Europe for a more than a decade, but it has been soaring in Asia, said Mr Carbon. "Rising incomes mean Asia's energy demand will continue to soar. Asian, not G-3 demand, will drive the price of energy." The G-3 refers to the top three developed economies in the world - the US, Europe and Japan. In addition, investor funds and capital "will flow to Asia like never before". "Businesses want to be where the growth is," said Mr Carbon. In the shorter term, Asian stocks are poised to extend their strong performance since bottoming out in January, said Ms Joanne Goh, DBS regional equity specialist, in a report. "Improving global data, reasonable valuations, and a pragmatic Federal Reserve calendar will support gains in a low volatility environment," she said. She noted that there are many concerns, especially with the US market reaching new highs and extreme valuations. Still, even if the US market falls from its peak, she does not see a major correction happening in Asia.

This article was first published on June 24, 2014. http://business.asiaone.com/news/economi...kxXqG.dpuf

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