Macro Themes For 2007

Transcription

1 4 th Glbal Markets Seminar Santiag, Chile March 2007 Macr Themes Fr 2007 Chen Zha Managing Editr Glbal Investment Strategy

2 GLOBAL ECONOMY: HIGHER PRODUCTIVITY, INCREASED ECONOMIC PROSPERITY Ann% Chg GLOBAL REAL PER CAPITA GDP* (5-YEAR MOVING AVERAGE) (LS) CORE** CONSUMER PRICES (RS) Ann% Chg * Includes estimates, IMF data. ** Excluding fd and energy, shwn smthed. OECD data.

3 KEY ANCHORS FOR LOW INFLATION ARE STILL IN PLACE Ann% Chg GLOBAL HOURLY EARNINGS: MANUFACTURING* (LS) CHINESE UNIT LABOR COSTS** (RS) U.S. IMPORT PRICES FROM ASIA* (LS) CHINA: TOTAL GOODS (RS) * Shwn smthed, OECD data. ** Shwn rebased t Jan = 1. * Asian newly industrialized cuntries including Hng Kng, Singapre, Suth Krea and Taiwan. Shwn smthed.

4 EURO AREA AND JAPANESE UNIT LABOR COSTS Ann% Chg 2 EURO AREA UNIT LABOR COSTS Ann% Chg JAPANESE UNIT LABOUR COSTS (MANUFACTURING) Nte: Eurpean Central Bank/ Eurstat data. Nte: Shwn smthed.

5 U.S.: A FLATTENING PHILLIPS CURVE IMPROVING INFLATION/GROWTH TRADE-OFF: OECD COUNTRIES Inflatin mid 1970s Inflatin s Mid 1990spresent Unemplyment Rate Nte: Slpes are derived by regressing U.S. cre CPI n the unemplyment rate ver the time perids indicated. Real GDP Grwth Nte: Slpes are derived by regressing OECD CPI n OECD real GDP grwth ver the time perids indicated.

6 CHART RISING MARSHALLIAN TITLE K AND FALLING INFLATION 6 SUPPLY-SIDE GROWTH AND ASSET PRICE INFLATION Ann% G7 U.S. MARSHALLIAN K* (LS) Chg REAL PERSONAL 130 CORE CONSUMER INCOME PRICES** (RS) 250 TRADABLE 250 GOODS 125 There is a paradx: 200 PRICES* Rising Marshallian K suggests liquidity is excessive hwever, disinflatin/lw inflatin suggests therwise * Brad mney relative t nminal GDP rebased t Jan =. ** Excluding fd and energy, OECD data. Nte: Bth series shwn smthed WEALTH** MEDIAN HOUSE PRICES*** * U.S. imprt prices relative t cnsumer prices. ** Measured as the gap between real persnal incme and tradable gds prices. *** Average f existing and new hmes, weighted by the number f units sld. Nte: Real persnal incme and tradable gds prices shwn rebased t Jan =. 0

7 CHART U.S. STOCKS TITLEARE CHEAP 1600 U.S. S&P % COMPOSITE VALUATION INDEX* % * Based n ttal returns in bnds, cmmdities, gld, huse prices and prfits. Interval f estimatin:

8 CHART U.S. EQUITIES TITLE VERSUS CAPITALIZED EARNINGS U.S. S&P 500* CAPITALIZED 12-MONTH FORWARD EARNINGS* S&P 500 LESS CAPITALIZED % 12-MONTH FORWARD EARNINGS % * Shwn rebased t Jan = and as a natural lgarithm. Nte: earnings are IBES data, capitalized using the -year gvernment bnd yield. 90

9 CHART CAPITALIZED TITLE EARNINGS: USING NORMALIZED PROFITS 7.6 U.S. S&P 500 CAPITALIZED TREND 12-MONTH 7.6 FORWARD EARNINGS* % DEVIATION FROM CAPITALIZED % 40 TREND 12-MONTH FORWARD EARNINGS* * IBES data, shwn rebased and capitalized using the -year gvernment bnd yield. Time trend frm present. Nte: bth series shwn as a natural lgarithm.

10 CHART P/E RATIOS TITLEAND INTEREST RATE CYCLES U.S. S&P 500 PRICE-TO-EARNINGS RATIO % 18 FED FUNDS RATE 18 % Nte: shading dentes perids f rising Fed Funds rate.

11 CHART SEARCHING TITLE FOR EQUILIBRIUM P/E: U.S. RELATIONSHIP BETWEEN INTEREST RATES AND P/E RATIOS: EURO AREA P/E Ratis The current P/E is 18, which is % belw equilibrium P/E Ratis P/E Ratis The current P/E is 16, which is 30% belw equilibrium P/E Ratis U.S. Average Interest Rate (%) Eur Area Average Interest Rate (%)

12 CHART EM STOCKS TITLEAND FED POLICY CYCLE EMERGING MARKET EQUITIES* (LS) U.S. FED FUNDS RATE (RS) Ann Chg * Shwn as a natural lgarithm. S&P/IFC Investable index.

13 CHART LONG EMERGING TITLE ASIA/SHORT LATIN AMERICA LATIN AMERICAN RELATIVE TO EMERGING ASIAN EQUITIES* CRB** FUTURES INDEX (NATURAL LOGARITHM) * Shwn in U.S. dllar terms. Surce: Mrgan Stanley Capital Internatinal. ** Cmmdity Research Bureau, Inc.

14 CHART CORPORATE TITLEJAPAN JAPANESE DEBT*-TO-EBITDA** % % DISTRIBUTION OF SHARES OUTSTANDING CROSS-HELD INDIVIDUALS 20 FOREIGNERS * Shrt and lng-term brrwing fr nn-financial crpratins. Surce: Ministry f Finance. ** Earnings befre interest, taxes, depreciatin and amrtizatin.

15 CHART THE JAPANESE TITLE RESTRUCTURING STORY 6.0 JAPANESE FORWARD EARNINGS* UNIT LABOR COST INDEX (MANUFACTURING) * Based n 12-mnth frward earnings, IBES data.

16 CHART JAPANESE TITLE EQUITIES: UNDERVALUED 16 1 JAPANESE INDUSTRIAL PRODUCTION Th 40 NIKKEI 225 INDEX Th

17 CHART GLOBAL TITLE YIELD CURVES: A HISTORICAL PERSPECTIVE Bp Bp YIELD CURVE (-YEAR MOVING AVERAGE) 0 U.K.* Bp U.S.** Bp * -year gvernment bnd yield minus 3-mnth eur rate. Lng-term gvernment security yield minus bank rate prir t ** -year gvernment bnd yield minus 3-mnth eur rate. Mdy's crprate AAA bnd yield minus shrt-term cmmercial paper prir t 1960.

18 CHART REGIONAL TITLE YIELD CURVES* Bps Buy flattener U.K. Brazil** Krea Singapre Denmark U.S. Australia Thailand Eur Area Taiwan Canada Switzerland Nrway India Sweden Mexic Malaysia Japan Pland 0 - Hungary Buy steepener Suth Africa New Zealand -200 * -year gvernment bnd yield minus 3-mnth eurdepsit rate. **3-year gvernment bnd yield minus 3-mnth eurdepsit rate. 18

19 CHART TWO DIFFERENT TITLE U.S. DOLLARS 120 U.S. TRADE-WEIGHTED DOLLAR* PPP** +/- % TRADE-WEIGHTED DOLLAR 140 VERSUS MAJOR CURRENCIES*** PPP** +/- % * Surce: J.P. Mrgan Chase & C. ** Purchasing Pwer Parity based n prducer prices. ***Defined as the Canadian dllar, Japanese yen, British pund, eur, Swiss franc, Australian dllar and Swedish krna. Surce: Federal Reserve.

20 20 CHART EURO/YEN: TITLEWATCH FOR AN UNDERSHOOT / JAPANESE YEN VERSUS EURO EXCHANGE RATE PPP* + / -% STANDARDIZED RATE OF CHANGE / * Purchasing Pwer Parity based n prducer prices. -4

21 CHART YEN CARRY TITLETRADE: WORLD IS ON HIGH ALERT / US$ JAPANESE YEN EXCHANGE RATE / US$ NUMBER OF REFERENCES TO YEN AND CARRY TRADE APPEARING IN NEWPAPERS* Wrld was unprepared On high alert * Surce: Factiva, Wall Street Jurnal, Financial Times and New Yrk Times. Shwn as a 3-mnth mving ttal.

22 CHART JAPANESE TITLE YEN AND NET FDI FLOWS / US$ JAPANESE YEN EXCHANGE RATE (LS) -7 NET DIRECT INVESTMENT* (RS) Tn 22 * Shwn as a 12-mnth mving ttal.

23 CHART YEN BEAR TITLE MARKET: THEN AND NOW 23 / / US$ JAPANESE YEN EXCHANGE RATE US$ % High vlatility YEN 3-MONTH 22 OPTION-IMPLIED VOLATILITY

24 CHART COMMODITIES: TITLE ROTATIONAL SELLOFF? 24 US / Lb US / Lb PRICE OF COPPER (LS) PRICE OF NICKEL (RS) PRICE OF COPPER (LS) PRICE OF ZINC (RS) US$/ Tn US$/ Tn COMMODITY PRICES: BUBBLES AND SPECULATION % OTC NOTIONAL VALUE OF COMMODITY DERIVATIVES* (LS) PRICE OF COPPER (RS) * Nn-precius metals, shwn as a percentage f U.S. equity market capitalizatin. Surce: BIS. US / Lb

25 CHART EVERY DECADE TITLE HAS A WINNER The Walt Gld Nikkei 225 NASDAQ Energy? 22 Disney C Uranium 6 Oil Nte: All series are rebased t 1 at beginning f decade.

26 CHART ENERGY TITLE STOCKS AND TECH MANIA: A HISTORICAL PERSPECTIVE 1400 NASDAQ (1988-PRESENT) CANADIAN OIL AND GAS EQUITIES* (1996-PRESENT) * Datastream data. Nte: Space between the ticks n x-axis represent ne year. Series are rebased t at beginning.