Summit Notebook

Exclusive outtakes from industry leaders

from Global Investing:

BRIC: Brilliant/Ridiculous Investment Concept

BRIC is Brazil, Russia, India, China -- the acronym coined by Goldman Sachs banker Jim O'Neill 10 years back to describe the world's biggest, fastest-growing and most important emerging markets.  But according to Albert Edwards, Societe Generale's uber-bearish strategist, it also stands for Bloody Ridiculous Investment Concept. Some investors, licking their wounds due to BRIC markets' underperformance in 2011 and 2010, might be inclined to agree -- stocks in all four countries have performed worse this year than the broader emerging markets equity index, to say nothing of developed world equities.

For years, money has chased BRIC investments, tempted by the countries' fast growth, huge populations and explosive consumer hunger for goods and services. But Edwards cites research showing little correlation between growth and investment returns. He points out that Chinese nominal GDP growth may have averaged 15.6 percent  since 1993 but the compounded  return on equity investments was minus 3.3 percent.

But economic growth -- the BRIC holy grail -- is also now slowing. Data showed this week that Brazil posted zero growth in the third quarter of 2011 compared to last year's 7.5 percent. Indian growth is  at the weakest in over two years. In Russia, rising discontent with the Kremlin -- reflected in post-election protests -- carries the risk of hitting the broader economy. And China, facing falling exports to a moribund Western world,  is also bound to slow. Edwards goes a step further and flags a hard landing in China as the biggest potential investment shock of 2012.  "Yet investors persist in the BRIC superior growth fantasy...If growth does matter to investors, they should be worried that
things seem to be slowing sharply in the BRIC universe," he writes.

Thomson Reuters data earlier this year appeared to show some disenchantment with the BRIC concept. After rising 1600-fold between 2003 and 2007, assets in BRIC funds had shrunk to $28 billion by August 2011, almost a quarter below 2007 peaks, a bigger fall in percentage terms than most other fund categories.

from Chrystia Freeland:

The revolutionary significance of job growth

It was striking to hear how encouraged both Klaus Kleinfeld and Dominic Barton sounded when Chrystia asked them about the effects of the recent turmoil in the Middle East on the business environment there. Barton believed the regime changes in Tunisia and Egypt were "the dawn of a new good thing that's occurring" and noted that it is likely that new capital will come into these countries as a new leadership emerges. Kleinfeld, whose company is in the process of building the world's largest integrated aluminum system in Saudi Arabia, said that Alcoa is still very comfortable in the region and that the only surprises with their Saudi partners have been positive surprises. For Kleinfeld, the most assured way to bring about stability in a region plagued by unrest is to have businesses come in and create jobs:

If there's one thing that the Middle East needs particularly for the young -- as well as well-educated people -- it's jobs. And it does it in a region which typically has not had much of an economic growth around Ras Azzour. So that's all very, very good. And not just for us as a company but also for the region. And it's gonna have a stabilizing as well as a kind of uplifting, positive element

from MediaFile:

GlobalMedia-China’s shouts of “You suck!” music to executives’ ears

Big splashy action movies from the U.S. usually play well abroad. It should come then as no surprise that World Wrestling Entertainment, known for hulky dudes and toned ladies who act out soap opera scenarios both in and out of the ring,  manages to find fans well beyond these borders.

So, naturally, international expansion is something on the mind of Donna Goldsmith, the chief operating officer of WWE, who ticked off countries including Russia, India and Brazil where it’s seeking to introduce characters like Sheamus, Triple H and John Cena.

Barbie does Beijing: The adventures of a Malibu girl in China

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BarbieModern day national influence, some smart people like to argue, spreads through the “soft power” of brand appeal and attraction rather than the “hard power” of coercion. In China, one avatar of U.S.  soft power tends to be trim and busty, and come with blue eyes and a long mane of blonde hair. Her name is Barbie, she is made of plastic, she was born in Malibu and Chinese girls want to be like her.

Barbie comes in all sorts of versions, according to the man who introduces her to her foreign friends, Mattel’s international president, Bryan Stockton. Still, in China, the No. 1-selling Barbie doll is the sunny surfer girl who cruised across the Pacific from southern California to bring millions of young Chinese girls a new vision of the world, not to mention themselves.

Recession’s perfect storm speeds up change in ad industry

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Why is it that the United States’ advertising as a proportion of marketing services is at its lowest point since 1977, maybe even lower than since the Second World War?

You may have guessed it it’s the recession.

But it will get better, Martin Sorrell, CEO of advertising giant WPP, said.

“The recession is less worse,” Sorrell said, repeating a favourite phrase of late, and while it’s the biggest recession since 1929 it is also “a perfect storm” that has brought forward change. 

Peugeot is far too small in China

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There is only one market really booming in the world and that is China, pity Peugeot only has a very small market share there.

Nicolas Wertans, deputy managing director of the Peugeot brand at Europe’s second-biggest carmaker PSA Peugeot Citroen, recently went to Beijing.

U.S. Commerce Secretary doesn’t like ring of Shanghai Silicon Valley

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U.S. Commerce Secretary Gary Locke says one thing he doesn’t want to see is a Shanghai Silicon Valley develop from China’s investment in clean energy.

He warned that if the United States doesn’t move forward on clean energy, it risks falling behind China where the government is spending almost $100 billion a year to support renewable energy and clean energy efficiency.

60-hour work weeks, all in the name of climate change

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Some politicians may be accused of dragging their heels when it comes to dealing with climate change, but you can’t say members of the United Nations’ Clean Development Mechanism’s executive board aren’t clocking in the hours.

The Clean Development Mechanism (CDM), an emissions trading scheme under the Kyoto Protocol worth $33 billion last year according to the World Bank, allows companies and countries to outsource their greenhouse gas reduction efforts by investing in clean energy projects in emerging countries like China and India, where making emissions cuts costs less.

The visible hand

Beijing’s affordable housing projects — which account for 10 percent of the government’s huge $585 billion stimulus package, a key to propping up the crucial property market — is making fans
of low income wage earners, but has some developers seething.

Some developers see the government’s role in the market as interference in market forces that are distorting prices.

A “cash cow”

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By Don Durfee

Safe havens have been few and far between during the global economic crisis, but one has been fairly reliable: infrastructure. So it’s not surprising that many companies are betting on the biggest infrastructure opportunity of them all, China’s $585 billion spending package.

One of those is NWS Holdings, a subsidiary of Hong Kong’s New World Development. Speaking at the Reuters China Investment Summit, executive director Tsang Yam Pui spoke glowingly about the company’s investment in a project to develop 18 rail container terminals around the country.

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