Report
EUR 529.44 For Business Accounts Only

A Tale of Two Countries

In January we visited two of Asean’s most populous countries. Between them, Indonesia and Vietnam account for more than half of Asean’s 650m people. They are also the two most obvious potential beneficiaries of the fallout from the ongoing trade dispute between the US and China.

Regardless of the outcome of talks between the two largest economies on earth, the damage to the existing world manufacturing trading order has already been done. China plus one is no longer a preferential industrial location strategy for multinational companies, it is an imperative. Businesses cannot stand by idly while governments, fickle beasts at the best of times, determine their future profit potential. Like Brexit, companies are already beginning to relocate out of China even before the dispute is either settled or escalated. Profits can’t wait for governments to be have sensibly.

But where to go? There are a number of alternatives but Indonesia and Vietnam both have large, youthful working populations (and really here we are talking about the accessible workforces on Java and in Vietnam) and both are located within easy reach of the existing Asian supply chain. But are both equally ready and equally keen to pick up the China baton? That was one of the main issues we wanted to assess during our country visits.

In the attached report, A Tale of Two Countries, we explain why there is a very obvious winner in this contest. Unfortunately, for institutional equity investors it isn’t the country that is included in most Asia-Pacific or emerging market benchmarks.
Provider
Asianomics Group Ltd
Asianomics Group Ltd

Asianomics, founded by Dr Jim Walker in 2007 and based in Hong Kong, specialises in economic analysis research, cross-referencing their work with credit cycles, profit cycles and cash flows. Asianomics focus is on developments in the Asia-Pacific region, and they also cover developed markets like the US and Europe.

The Austrian Economics model provides a framework for the economic research. The basis of the School of Austrian Economics is that economies work more efficiently and effectively when companies and individuals are free from excessive interference by government and special interest groups. The Asianomics economic research team includes Deputy Chief Economist Sharmila Whelan who is recognised for non-consensus thinking and her depth and quality of primary research, and Chief Economist Dr. Jim Walker.

Asianomics’ subscribers have access to regular economic commentary, stand-alone Country Reports, Special Reports and Investment Strategy Reports. Dr. Jim Walker also provides weekly webcasts.

Dr. Jim Walker is regarded as one of Asia’s leading economists. Prior to setting up Asianomics, he was the Chief Economist at CLSA Asia-Pacific Markets, where he worked for more than 16 years. He has achieved numerous ‘Best Economist’ rankings in the Asiamoney, Institutional Investor and Greenwich surveys of fund managers. 

Previous successful calls include:

  • In 1995 Dr. Jim Walker wrote about the prospect of Asia being forced off its de facto dollar peg “within the next two-three years”. The Asian Crisis, precipitated by the Thai baht devaluation, began in July 1997.
  • Forecasted the US 2007 downturn and financial sector meltdown in series of ‘Apocalypse’ reports.
  • Called early the upswing in the Indian stock market in the final quarter of 2013.

Recent Recommendations:  

  • Overweight China - We are overweight Chinese equities with momentum improvement in the economy.
  • Short Sterling, Long Renminbi - China’s currency offers good upside with a positive carry.
  • Short European Financials, Long Indian Financials - This is the simplest pair trade to play superior demographics and growth in Asia relative to the region with the biggest problems.
  • Long EM Asia, Short Developed countries - South and SE Asia, and direct investors from North Asia, are ‘buy and hold’ investment bets.

Analysts
Jim Walker

Other Reports from Asianomics Group Ltd

ResearchPool Subscriptions

Get the most out of your insights

Get in touch