Posts Tagged ‘Hong Kong’

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Is it for real? We keep hearing talk of an export-led recovery for the UK. But is it simply that the UK exports are so low that any rise looks to be quite significant in percentage terms. A new report from Ernst and Young provides just a hint that this time it might be for real.

UK companies need to look abroad. The last few years have seen UK consumers cutting back, and that, suggests Ernst and Young, is why they have been focusing on ways to increase exports.

The story overall? Well, let’s return to that in a moment. Let’s start with the positive.

According to Ernst and Young, the West Midlands “is emerging as an export powerhouse” and “is on track to grow goods exports faster than any other UK region by selling high-end engineering far outside Europe.” Engineering goods exports are forecast to grow at “an annualised rate of 4.8 per cent, worth £6.9 billion in 2017, compared with £5.5 billion in 2012.”

UK automotive exports to China are expected to grow 11.6 per cent – making it the UK’s top automotive trading partner by 2017, while exports of personal vehicles to Thailand are expected to rise from $302 million in 2012, to $617 million by 2017. The UK is expected to capture a 53 per cent share of the entire import market. UK engineering is also seeing exports rise to the Middle East – with growth in turbo jet exports to Qatar alone forecast to grow from $273 million in 2012 to $481 million in 2017. And finally, UK biopharma exports to China are expected to double from $52 million in 2012 to $104 million by 2017, with Chinese biopharma imports set to rise to $2.5 billion by 2017 (from $1.4 billion in 2012).

Break it down bit further, and Ernst and Young forecasts that in 2017, UK engineering exports to China will be worth $2.4 billion, automobile exports $3.8 billion and metals $2.1 billion. For Brazil, it forecasts $0.7 billion for engineering, $0.6 billion for automobiles and $0.6 billion for chemicals. For Hong Kong it forecasts engineering exports of $1.7 billion, $1.4 billion for electronics, and $1.3 billion for previous metals. And for Saudi Arabia it forecasts engineering exports of $0.9 billion, $0.4 for electronics and $0.4 for pharmaceuticals.

And yet for all that, Ernst and Young says that across the UK exports are not growing fast enough. It forecast 0.3 per cent annual growth for UK good exports against 1 per cent for the European average between now and 2017. So for the conclusion: making progress, but could do better.

© Investment & Business News 2013

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What do you want to do today? How about starting off with a nice coffee and at Harris + Hoole’s coffee shop, a bit of yoga, followed by some shopping at a trendy boutique followed by lunch at a Giraffe restaurant, and then off to the supermarket complete with a ‘Euphorium’ and something called the ‘Bakery Project’. If that all appeals to you, that might mean you would like a visit to Tesco’s new leisure and shopping destination in Watford. But here is some bad news for Chinese shoppers who fancy a similar experience in downtown Beijing. Tesco might be trying to do something big in the UK, but its plans are quite different in China. Is this the company’s opportunity to re-establish itself as an irrepressible force of nature, or is this Tesco giving up on the dream of creating a global super supermarket?

Around a year ago, research firm IGD waxed lyrical about Tesco. Of the world’s four largest retailers, (Tesco sits at number three in that list) IGD predicted the UK company was set to benefit the most from globalisation. It said: “Tesco’s international markets, particularly China, Turkey and India, will be a key element in driving their long-term growth and returns. The company will try to replicate its successful concepts in the UK, such as Express stores and Clubcard rewards scheme, in other countries.”

Well, the quest for world domination seems to be on hold. The company was probably right to pull out of the US. Its Fresh and Easy venture was like a black hole draining it of money. But the timing was awful. It moved into the US just as the world’s largest economy entered its worst recession since the 1930s. It exited just as the US economy appeared to be recovering. Maybe Tesco will be back, maybe it has learnt from its initial foray into the US, and will be back, but this time redoubtable. Maybe…

In China, Tesco has agreed to a joint venture with China Resource Enterprises. It has opted for a 20 per cent stake in the venture, throwing in its 130 stores, to form part of a 3,000 store empire. From a distance of several thousand miles it rather seems as Tesco has chosen to give-up on advancing its brand name; has given up promoting the Tesco business model worldwide, and has opted for a very logical and sensible joint venture rather than trying to create a truly global giant retailer.

As for Blighty, the problem faced by the company is that already has a massive share of the UK retail market. Maybe in creating a retail destination Tesco has chosen the only way it can expand in a market where it already has such a strong presence. Perhaps this approach can translate into other territories, and Tesco will be back in the US and via its partner in China, in the world’s second largest economy but this time as a pioneer of retail/leisure destinations.

But frankly it does rather look as if the dream of creating a global retail super heavyweight is over.

© Investment & Business News 2013

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It was another record breaking week for markets in the US, with the Dow and S&P 500 hitting all-time highs and finishing the week down by a fraction from the peak. In fact, the Dow did end last week at 14865, up 2 per cent on the week, and up 13 per cent this year.

The FTSE 100 finished last week at 6348, also up 2 per cent on the week and by 8 per cent this year.

In Germany the DAX has seen more modest gains, up 1 per cent last week, and by 2 per cent this year.

In Japan, in contrast, the Nikkei 225 rose by 5 per cent last week and is up 30 per cent this year.

Markets in Hong Kong and China fell last week, and are down so far this year.

You can see why markets in China and Germany have not done quite so well. But why so much exuberance in the US, the UK and Japan?

The markets seem convinced that Abeonomics is going to work; that at last Japan is going to implement QE big time, which is seen as being the policy the economy has really needed over the last two decades. But don’t forget that Japan’s savings ratio has fallen sharply in recent years anyway. This fact alone may have far more impact on Japan’s economy over the next decade than QE.

And why has Japan’s savings ratio fallen? Surely it is because much of its population are now retired and have no choice but to draw down savings. I’m not sure that is a good thing.

As for the US, the economic data is not so good. There has to be a big question mark over the sustainability of recent rises in US markets.

Ditto, but even more so for the UK.

Others have justified market rises by pointing to good news out of China. But that run of good news may be over, see: China sees growth disappoint as India sees some promise

But the single biggest reason used to justify rises in the markets during the first few months of this year was that the Eurozone was past its worse. Mario Draghi’s promise to do whatever it takes to save the euro impressed the markets.

Right now as the Cypriot debacle rolls on, and unemployment across much of Europe hits terrifying levels, it looks very hard to justify such optimism.

Given this, why haven’t markets fallen back?

©2013 Investment and Business News.

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