The Emerging or Submerging Economies

Undoubtedly, the investment markets of our future are the emerging economies. Here we are asked to invest money at a greater risk but, with the hope of a greater return. However, that simplistic line has not always been proven true. All is not as it sometimes seems. At first glance, stock markets around the world give you a wonderful view of the global economy, but when taking a closer look, perhaps they do not. Global stock markets show the perceived value of stocks in those markets, not necessarily the truth on the ground.

Therefore, throughout the world, you have local markets which are have restricted and limited stocks and breadth. Developing nations often come from an economy based on commodities, thus their markets frequently float on the confidence of the value of that commodity (oil, copper etc.). Local indices are weighted towards older commodity companies, so dwarf the value, opportunity, and growth potential for these developing countries.

Take the example of South East Asia, where oil, palm oil and rubber firms have been the traditional companies of the likes of Malaysia and Indonesia. Yet speak to the population and that is not where they see their future and growth. The message is, that investors must look inside these markets to ensure that they really are investing in tomorrow’s developing economy and not yesterday’s commodity demand. In the 1980’s, we all demanded crude oil. In fifty years’, it may become almost unsaleable.

It would be grossly unfair then to not acknowledge the radical changes that have been going on. For example, the numbers of people coming out of poverty have been quite astonishing. In 2015, 10% of the world’s population, or 734 million people lived on less than $1.90 a day. That is down from nearly 36% or 1.9 billion people in 1990.

You might recall the fashion fad of the BRICS funds (Brazil, Russia, India, China and South Africa). They were the great growth centres of the future, but here was a classic example of the danger of the simplistic headline over the detail. Three of the constituents were dominated by commodities and the other two (China and India) were vastly different from each other and the rest.

While of course, this is brilliant news, with the effects of the pandemic on the oil price drop, this trend is inevitably set to reverse in 2020. This crisis will have a disproportionate impact on the poor, through job loss, loss of remittances, rising prices, and disruptions in services such as education and health care. For the first time since 1998, poverty rates will go up, as the global economy falls into recession and there is a sharp drop in GDP per capita. The ongoing crisis may well erase almost all the progress made in the last five years. The World Bank estimates that 40 million to 60 million people will fall into extreme poverty (under $1.90/day) in 2020. The global extreme poverty rate could rise by 0.3 to 0.7 percentage points, to around 9% in 2020.

Interestingly however, it has been some of the emerging markets that have been ahead of the game in dealing with the virus crisis. Asian countries like China, Korea and Taiwan, have used their history of dealing with pandemics, coupled with severe lockdowns (in China), to steer the early months of the crisis far better, when compared to many ‘developed nations’.

As for the BRICS, countries such as India and South Africa also implemented early and stringent lockdowns, which should help reduce the impact on their economies, especially considering their relatively young populations. The big losers are likely to be Brazil, Russia and Mexico, whose responses were ‘too little too late’ and could potentially get worse given the local issues of obesity in Mexico and the ageing population of Russia. 

And finally… The knicker nicker finally nicked. News from Singapore that there has been a breach of lockdown that makes eye testing trips to Barnard Castle almost acceptable. It seems that there has been a serial underwear thief who has admitted to breaching Singapore’s strict Covid-19 lockdown to sneak into a backyard to purloin women’s lingerie.

Lee Chee Kin has stolen underwear from homes on at least thirty occasions since 2018 and police found more than one hundred bras during a raid on his home last year, according to court documents. The 39-year-old was on bail over previous charges of underwear theft last month, when he snuck out of his home and climbed into a backyard on the hunt for more intimates.

A prosecutor told the court that Lee “Would select bras and panties to steal based on their appearance […] The accused used the stolen bras and panties for his own gratification.”.

Lee, who will be sentenced at a later date, could face a lengthy stretch.

Singapore had closed schools and workplaces at the beginning of April after being hit by a second wave of virus cases. People were told to stay at home as much as possible, and only go out for essentials such as exercise and grocery shopping and presumably replacement underwear.

Have a good week


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