Easter Break, New Beginnings - 10th April

Easter Break – new beginnings?
*What am I doing here when most of the world’s markets are shut I hear you ask? Well – sometimes the markets never sleep, and other times good commentary never sleeps. Reminds me of a line from a recent great comedy movie…”60% of the time, it works every time” – what?
So what’s happened this week? Japan has temporarily stolen the limelight announcing its plans to spend big ($150bn) to get the world’s 2nd largest economy moving again, North Korea has caused some consternation for its neighbours through its military muscle-tensing (although the US and others say they are simply lying about the “successful” test), Iran is also flexing itself through new improvements in their nuclear programme, Obama has slipped back into second gear for a moment or two after an incredibly charming two weeks (it’s not easy dealing with so many older and more bitter characters around you in Europe I’m sure), and the all-important financial markets have continued to rise across the globe for a 5th week in a row – the US financials have embarked on their Q1 ’09 earnings announcements - and results are looking strong. Even the UAE has declared that Dubai’s woes have reached their nadir and that “things can only get better”. Positive feelings all around then wouldn’t you say? The most worrying piece of news the growing stand-off between a tiny band of pirates and the mighty US naval fleet cruising in to confront them – oh..and a disorientated hump back whale stuck in New York harbour – could that be an omen portending great performance for the markets though? In this environment we should jump on any excuse to cling to positive hope!

Most global markets are of course shut today, but those that are trading (primarily around Asia) are trading positive – Japan’s Nikkei adds to recent strong gains and ends the week +0.54% (YTD now +1.2%) – China’s CSI continues to rise and rise +3% to close out the week - some profit-taking most likely to come into play soon – but also all part of China’s plan to ensure it looks great in the hardest of times for the Western world. Associated economies in Asia that hinge greatly on the export market that Japan and China generates, namely Taiwan and Korea also pursuing their impressive rebounds - +2% and +1.5 respectively.
Europe is shut for Good Friday, as are US markets.
Currencies still trading though, and US$ heads for a weekly gain against Euro (biggest weekly gain here in 3mths) and GBP.
Oil spurts +5.5% to most-likely end the week flat. Gold also maintains that new trading range, but still slightly off for the week. The BDIY managed to make its first positive close yesterday (+1%), the first time in 23 sessions! Whether this is another significant change in sentiment or just a blip we’ll have to wait-and-see, but it’s certainly nice to have this leading indicator looking green again.

*Language Lessons”
The top US banks that once dominated not only the financial lending scene as well as commandeered respect for apparently hiring the brightest and best of any profession have certainly been humbled in recent months. In fact, the combined markets cap of the top 5: Citi, Goldman Sachs, Morgan Stanley, JPMorgan, Bank of America is a good 30% higher than the lows witnessed in November through to February – but total market cap is not much higher than Citi’s market-cap at its high in May 2007 - around $290bn for all 5 combined. However, when you compare this to the market caps of China’s two largest banks at present, ICBC ($240bn) and China Construction Bank ($220bn) it is clear just how far the US mighty have indeed fallen.
Spending any time with the sub-prime-tainted-free senior management of China’s largest financial institutions provides a great insight into the relaxed and strategic thinking behind the nation’s increasingly influential domestic financial giants. The natural rate of saving across China is playing right into the hands of the banks, and the relatively clean (and large) balance sheets are being tightly controlled to prevent a larger portfolio of NPLs than necessary. Of course, transparency (compared to below) is still an issue through corporate results, but one that is being addressed from within the Chinese state authority itself.
What language would you expect the world to conduct business in if you consider that 1/3 of the population are Chinese? Yep, English – doesn’t really make sense does it? The reason of course is steeped in the history of capitalism and the great marketing job the US has achieved through media to create a de-facto global business language. Some would expect the Chinese to look to reverse this and stamp their own sense of national pride into their corporate culture. However, the most striking aspect of China’s new breed of corporate giants is that the majority of their senior delegation have been educated and trained in foreign institutions and all read, write and speak English with an eloquent fluency that many who claim to be native speakers (like those with strong Texan twangs) could only dream of mimicking. Moreover, I learnt that even in the offices back in Beijing where these new giants of the financial world operate from, many meetings are conducted solely in English as part of their training and to ensure ease of integration for those foreigners working there.
The more the world sees of China and the best of what it has to offer, the more it understands its aims and goals on the world stage. We should not be frightened of having this rising world power set the tone for the rest when they place such emphasis on understanding other cultures in addition to their own – as witnessed on a recent trip across the Middle East. I was especially pleased to see the Chinese delegation passionately embrace the art of shisha-smoking, at a relaxed Lebanese dinner one evening, paying close attention to the details established around this most pleasant pastime. It made a refreshing change from the many times I have had to endure the negative responses from those western institution representatives that profess the “tobacco content is far too high” or “I don’t pollute my body” for them to consider doing the polite thing and trying a local custom. Pleeaaase..give me a break and send me those willing to learn and try any day!

Abu Dhabi – as clear as can be?
How things have changed in the last 5 years. Where once the Middle East and the secretive Sheikhs were considered as tightly-lipped as a captured secret-agent, they are now spilling the beans and providing information as easily as an excited little school-girl. A recent meeting saw the extent to which things have changed and the extremely professional nature of those now heading up some of the most important institutions within the UAE’s capital (and richest) city – Abu Dhabi.
A 20-yr document outlining the vision and expectations of the current Sheikh and his closest advisors has been published – from diversifying the Emirate’s reliance on oil and gas, to creating leading educational and healthcare institutions, plans have been laid out for all to see and for those on the outside to understand exactly where they might come in and provide their assistance.
Praise must be heaped on Abu Dhabi for its classy and consistent approach to providing guidance and clearly setting out an exciting and significant vision. If executed correctly, then the desire to become a true cross-road hub and a city of the future is a very feasible conclusion.
It is reminiscent of the great (and notoriously oft-repeated) “vision” that Dubai’s ruler put into place over 20yrs ago, the only difference that Abu Dhabi is capable of carrying out each and every project using only its existing riches and resources – this makes for a very different environment and one where the city’s personality and own characteristics can be tightly controlled without pandering to the whims and desires of an over-eager international construction company etc. There are surely some examples easily pointed out across Dubai where international firms were maybe a little too pushy when designing aspects that were there for more reasons than simply practical functionality – two Chrysler-like towers for example? Could it be anything to do with the fact it costs twice as much? Nahh..