Summit Notebook

Exclusive outtakes from industry leaders

from Global Investing:

BRIC: Brilliant/Ridiculous Investment Concept

Photo

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 Sakthi Prasad:

India Investment Summit comes to Bangalore

After completing the Mumbai leg, the 2010 India Investment Summit is set to arrive in the garden city of Bangalore on Wednesday. Long known as the pensioner’s paradise, Bangalore is fast morphing into a global, multicultural city. The city is also emerging as a favourite destination among young Indian professionals aspiring for a blue-chip career in the information technology business. But despite Bangalore’s success in the IT industry -- the showpiece of a rising India -- the city’s infrastructure has not been able to keep pace with its phenomenal growth over the last decade or so. Frequent power cuts, traffic-choked roads and lax urban planning often leave city dwellers and foreign investors in mute frustration. However, despite these issues, multinational companies have kept their faith in the city.

Executives of real estate, technology and pharmaceutical firms will be exclusively talking to Reuters journalists about their companies’ growth plans, challenges they face and business opportunities that are available within the wider context of India investment story.

Stay tuned.

A bubble in the real estate market?

Photo

INDIA-URBANISATION/Have you tried buying or renting a house in Mumbai recently? If so, then I won’t be surprised if you think real estate prices are plain expensive, and incredibly so. But that’s almost always been the case in India’s commercial capital. After all, when was the last time someone told you they got a cheap house in the city?

So is the real estate market in a bubble? We asked Adi Godrej, the man who controls Godrej Properties, if things could get bubblicious. This is what he had to say: “I don’t think we are in a bubble, because demand is strong, but we could get into a bubble.”

Paranoid governments and conspiracy theories

Photo
Adi Godrej

Adi Godrej

Adi Godrej, who marshals his namesake $2.5 billion diversified group, believes the Indian government is “paranoid” about the possible effects of allowing more foreign investments into sectors such as airlines.

“They (the Indian government) have not allowed foreign airlines to invest in private airlines, and they cite security. I don’t see what security would be compromised,” Godrej told the Reuters India Investment Summit in Mumbai.

Recession’s perfect storm speeds up change in ad industry

Photo

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. 

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

Photo

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.

Expect action in Japanese M&A

Photo

After falling off a cliff at the start of this year as the global financial crisis gripped, mergers and acquisitions by Japanese companies overseas are likely to pick up again in the second half of this year, according to boutique Japanese M&A advisory firm Recof Corp.

There won’t be a flood of deals, Recof President Hikari Imai says, but the ones there are, are likely to be chunky as Japanese companies expand their frontiers beyond domestic markets where growth prospects are limited.

AUDIO – For Nordson — “Get ‘em right, or get ‘em out”

Photo

Throughout the current recession, many of the companies’ executives at this week’s Reuters Manufacturing and Transportation Summit have found an opportunity to review, pare back and possibly add on to their existing business mixes.

Such is the case for Edward Campbell, chief executive of Nordson Corp, which has a uniquely diversified set of businesses under its umbrella and is looking at what makes sense for them going forward.

AUDIO – Staying the course at CAT — But it’s a rough row to hoe

Photo

Caterpillar Inc Group President Ed Rapp knows that 2009 has been a tough one for his company, but he still thinks they can hit their numbers on revenue and earnings per share.

Speaking at the Reuters Manufacturing and Transportation Summit, Rapp (who, incidentally, has been with Caterpillar for almost 30 years and is still considered something of a “youngster” there!!) said that while there are still many hurdles for the company to avoid in the short term, he thought CAT’s previous guidance was within reach.

Audio – Outsourcing daily life

Photo

At the Reuters India Investment Summit we asked Managing Partner of IBM Global Services Sandip Patel about the first thing he would like to outsource from his daily life. His response, perhaps instinctively, was automating the cleanup of thousands of his emails.

 

Anantha Radhakrishnan, Vice President at Infosys BPO, yearned for extended telecommuting to cut down on travel time (and probably cost as well!!) when asked the same question.

  •