Produced by UOB Global Economics & Markets Research January 2015 1 Disclaimer This presentation was prepared for informational purposes only and shall not be copied, or relied upon by any other person for whatever purpose. The information provided herein is based on publicly available information. Although believed to be reliable, UOB Group makes no representation as to the accuracy or completeness. This presentation must be viewed in conjunction with the oral presentation provided by UOB and/or its officially appointed distributors/agents. Nothing in this presentation constitutes accounting, legal, regulatory, tax or other advice. The reader(s) of this document should consult his/their own professional advisors about the issues discussed herein. This presentation is not intended as an offer or solicitation with respect to the purchase or sale of any investment product and nothing herein should be construed as a recommendation to transact in any investment product. To invest, please refer to the prospectus (where applicable) for details. Global Economic Outlook 2015 Near-term Challenges, Long-term Goals Francis Tan UOB Global Economics & Markets Research 16 th Jan 2015
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Produced by UOB Global Economics & Markets ResearchJanuary 2015 1
Disclaimer
This presentation was prepared for informational purposes only and shall not be copied, orrelied upon by any other person for whatever purpose. The information provided herein isbased on publicly available information. Although believed to be reliable, UOB Group makesno representation as to the accuracy or completeness. This presentation must be viewed inconjunction with the oral presentation provided by UOB and/or its officially appointeddistributors/agents. Nothing in this presentation constitutes accounting, legal, regulatory, taxor other advice. The reader(s) of this document should consult his/their own professionaladvisors about the issues discussed herein. This presentation is not intended as an offer orsolicitation with respect to the purchase or sale of any investment product and nothing hereinshould be construed as a recommendation to transact in any investment product. To invest,please refer to the prospectus (where applicable) for details.
Global Economic Outlook 2015Near-term Challenges, Long-term Goals
Francis TanUOB Global Economics & Markets Research
16th Jan 2015
Produced by UOB Global Economics & Markets ResearchJanuary 2015 2
Near Term: Global Growth Conditions1
Mid Term: US Interest Rate Normalisation2
Long Term: Singapore’s Growth Prospect3
Produced by UOB Global Economics & Markets ResearchJanuary 2015 3
Source: Bloomberg (Daily Data)
Report Card 2014: Performance By Asset Classes
52.9
6.2
13.3 13.0
7.6
-2.6
35.4
-45.9
12.8
-4.7
-12.0
-60
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
Equities Sovereign FXCredit Commodities
Produced by UOB Global Economics & Markets ResearchJanuary 2015 4
UOB 1Q 2015 Economic Outlook Report
Produced by UOB Global Economics & Markets ResearchJanuary 2015 5
SBF Survey 2015
Produced by UOB Global Economics & Markets ResearchJanuary 2015 6
10
9
8
7
6
5
4
3
2
1
Anton CaseyHong Kong protest CPF contribution rate
XiaomiSouth Korea ferry MCE
Jennifer LawrenceScotland SG vs Juventus
InterstellarGaza SG Sports Hub
PSI SingaporeUkraine Pioneer Gen Package
Robin WilliamsISIS Westgate Mall
MH17Ebola NDP 2014
iPhone 6ALS SG Budget 2014
World Cup 2014MH17 GST voucher 2014
MH370MH370 PSI Singapore
Rank SG SearchesGlobal News SG News
Source: Google (Annual Data)
Top “Concerns” of 2014
Produced by UOB Global Economics & Markets ResearchJanuary 2015 7
There’s a Giant Contradiction at the Heart of the U.S. EconomyBy NEIL IRWINNovember 21, 2014
Produced by UOB Global Economics & Markets ResearchJanuary 2015 8
There’s a Giant Contradiction at the Heart of the U.S. EconomyBy NEIL IRWINNovember 21, 2014
0
500
1000
1500
2000
2500
0
2
4
6
8
10
12
199219941996199820002002200420062008201020122014
S&PYoY
S&P and M2 Money Supply
M2 Money Supply YoY
S&P 500
Dot-com Lehman
BrothersQE
0
2
4
6
8
10
12
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1991 1996 2001 2006 2011
Profit
Margin, %
Dividend
Yield, %
U.S. Corporate Profits and Dividends
Dividend Yield
Profit Margin
0
1
2
3
4
5
6
0
5
10
15
20
25
1998 2003 2008 2013
Price to
BookPrice to
Cash Flow
U.S. Corporate Valuations
P/CF Ratio
P/B Ratio
✓
100
200
300
400
500
600
700
800
1967 1972 1977 1982 1987 1992 1997 2002 2007 2012
No. (thous)
US Initial Jobless Claims since 1967
Recessions MA(4week)
325k
375k
Produced by UOB Global Economics & Markets ResearchJanuary 2015 9
Why?
There’s a Giant Contradiction at the Heart of the U.S. EconomyBy NEIL IRWINNovember 21, 2014
It’s allOverseas
DistortedMarkets
USSlowing
EurozoneJapanChinaBrazil Risks ↑
Deflation ↑ Commod ↓
Bonds ↑
Equities ↑
Bonds ↑
QE ↑
Demand ↓
Commod ↓
Supply ↑
✓x ?
Commod ↓
Bonds ↑
AD ↓Indicates
IndicatesRisks ↑
Produced by UOB Global Economics & Markets ResearchJanuary 2015 10
Crude Oil Prices (Brent and WTI)
Key Events That May Have Influenced Crude Prices Lower
01 Jan 08, 96.00
03 Jul 08, 145.29
01 Aug 08, 125.10
23 Jul 14, 107.62
26 Sep 14, 93.54
0
20
40
60
80
100
120
140
160
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
US$/barrel
WTI Crude Brent
Since Jun14: IEA cut 2015 demand forecast
by 800k bpd
Late Jun14: Permission granted to export US oil1 Jul: Libyan rebels agreed to open Es Sider & Ras
Lanuf (key export terminals closed for 1 year)
Sep14: Saudi, Iran, Kuwait gave discounts
Late Nov14: OPEC kept production unchanged
US Oil Production : From 4.7m bpd (crude) In Aug 2008 Up To 8.9m bpd (crude+shale) in Sep 2014 OPEC Oil exports to US: From 180.6m bpm in Aug 2008.... Fell to Just 8.7m bpm in Sep 2014QE Dates: QE 1: 25 Nov 2008 QE 2: 3 Nov 2010 Op Twist: 3 Nov 2011 QE 3: 12 Dec 2013
13 Jan 15, 44.5
-59%
Source: Bloomberg (Daily data)
Produced by UOB Global Economics & Markets ResearchJanuary 2015 11
3
4
5
6
7
8
9
10
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
mil
barrels/day
DOE Crude Oil Total Production Data
13th Jan 15: 9.312
+83%
US Domestic Crude Oil Total Production US Petroleum Trade Balance (US$ bn)
Source: Bloomberg, US Department of Energy Source: CEIC
-450
-400
-350
-300
-250
-200
-150
-100
-50
00
50
100
150
200
250
300
350
400
450
500
2007 2008 2009 2010 2011 2012 2013 2014*
US Petroleum Exports
US Petroleum Imports
US Petroleum Trade Balance (RHS)
Path To Oil Self Sufficiency In The US
Produced by UOB Global Economics & Markets ResearchJanuary 2015 12
Source: CEIC, UOB Global Economics & Markets Research est
Oil trade balance (% GDP)
Asian Net Oil Importers Are Going To Benefit As Oil Gets Cheaper, But Over-Reliance On Cheap Oil Is Bad
Oil trade balance (% GDP)
Malaysia Indonesia China S. Korea Japan Hong Kong Singapore Thailand
2009 2.2 -1.5 -1.9 -4.5 -1.7 -4.1 -3.8 -6.9
2010 1.7 -1.7 -2.4 -5.1 -2.1 -5.2 -3.7 -7.4
2011 1.1 -2.4 -2.9 -6.0 -2.6 -5.8 -3.8 -9.1
2012 0.5 -2.6 -2.9 -6.5 -2.9 -5.5 -6.7 -9.4
2013 0.2 -3.2 -2.5 -5.9 -3.2 -5.1 -5.7 -9.8
Produced by UOB Global Economics & Markets ResearchJanuary 2015 13
Source: Asian Productivity Organisation (Annual data)
Is World Growth More Decoupled?
Correlation Of Real GDP Growth (1990-2000)
Produced by UOB Global Economics & Markets ResearchJanuary 2015 14
Source: Asian Productivity Organisation (Annual data)
Answer: No. The World Is Ever More Inter-linked
Correlation Of Real GDP Growth (2000-2012)
Produced by UOB Global Economics & Markets ResearchJanuary 2015 15
Employment PMI (US vs ROW) Output Prices PMI (US vs ROW)
Produced by UOB Global Economics & Markets ResearchJanuary 2015 19
y = -2.4169x + 1003.3
R² = 0.588
-1,000
-800
-600
-400
-200
0
200
400
600
200 300 400 500 600 700
Nonfarm
Payrolls MoM
Net Change SA
Initial Jobless Claims SA
Recessions
Healthy Employment Situation Underpinning US Recovery
Note: Shaded regions denote U.S. recessionary years. A number persistently under 375k signals recovery. For a meaningful jump in payrolls, the number should remain below 325k
Source: Bloomberg (Weekly Data)
Note: The R2 refers to the Goodness-of-fit of the set of observations.
China Japan Taiw an Korea Hong Kong Singapore India Thailand Malaysia Indonesia Philiippines
US$ bn
2013 1998
Produced by UOB Global Economics & Markets ResearchJanuary 2015 47
Central banks are also implementing different interest rate policies
0
1
2
3
4
5
6
7
8
2006 2008 2010 2012 2014
% US RECESSION Japan Singapore United Kingdom United States Austra l ia Eurozone
Source: Bloomberg (Daily Data)
Global financial crisis
Record Long Period Of Record Low Int Rates
UOBForecast
Interest rates of selected economies
Produced by UOB Global Economics & Markets ResearchJanuary 2015 48
Foreign direct investment
Pte Resid Property Price Index
Country House Price-to-Income Ratio
United States 2.16
Germany 4.78
United Kingdom 6.73
Japan 6.99
Singapore 25.38
Produced by UOB Global Economics & Markets ResearchJanuary 2015 49
Affordability Comparison (2012)Rule-of-Thumb for affordability in global city-states is 4x for overall system, and 7-8x for private residential
DescriptionSingapore HDB BTO
Singapore HDB Resale
Singapore Condominium
Hong KongClass B**
Malaysia KL Condominium
Price per sqm S$3,583 S$5,453 S$11,976 HK$99,079 RM5,120
Average House Size (sqm) 90* 90* 110 56 120
Assumed House Cost S$322,500 S$490,774 S$1,317,360 HK$5,548,424 RM614,386
Average Monthly Household Income S$6,712*** S$9,515*** S$14,137*** HK$40,600 RM8,000
House Price vs Income Ratio
4.0 4.3 7.8 11.4 6.4
DescriptionChina
NationalChinaBeijing
ChinaTianjin
ChinaShanghai
Taiwan Taipei City
Price per sqm RMB5,430 RMB16,553 RMB8,010 RMB13,870 NT$93,000
Average House Size (sqm) 90 90 90 90 124
Assumed House Cost RMB488,700 RMB1,489,770 RMB720,900 RMB1,248,300 NT$11,532,000
Average Monthly Household Income
RMB5,476 RMB7,253 RMB5,491 RMB7,459 NT$73,360
House Price vs Income Ratio
7.4 17.1 10.9 13.9 13.1
Source: Singapore Department of Statistics, UOB Economic-Treasury Research
Assume 2 working adults in a household where household income data is not available.*Ave 4-room HDB
**Ave private residences in HK, Kowloon and New Territories ***Singapore -- Based on national median income, average national income and median resident household income for those living in condos and pte flats/houses respectively
Produced by UOB Global Economics & Markets ResearchJanuary 2015 50
Near Term: Global Growth Conditions1
Mid Term: US Interest Rate Normalisation2
Long Term: Singapore’s Growth Prospect3
Produced by UOB Global Economics & Markets ResearchJanuary 2015 51
% y/y Singapore Recessions Private Residential Property Price Index
Source: Bloomberg, UOB Global Economics & Markets Research (Monthly Data)
Property Prices Have “Cooled”
Singapore’s Property Price Index (Private Residential)
▼TDSR
1.76% 3.60% 2.50% 3.93%
90-96 1998 99-00 01-03 04-07
2.50%
08-09
2.25% 2.00%
10-14
Produced by UOB Global Economics & Markets ResearchJanuary 2015 62
Professional Economists’ Forecasts – N. America/W. Europe
November 2013
Improving Expectations For Western Economies
Austria, Canada, Norway, Switzerland and the UK Denmark, Sweden, Switzerland, Austria and Canada
November 2014
Source: BlackRock Institute Economic Cycle Survey, Nov 2013 & 2014
Produced by UOB Global Economics & Markets ResearchJanuary 2015 63
Professional Economists’ Forecasts – Asia
Source: BlackRock Institute Economic Cycle Survey, Nov 2013 & 2014
November 2013
Hong Kong, Japan, Malaysia, New Zealand, Singapore, the Philippines
Stable Outlook For Asian Economies
Hong Kong, Malaysia, New Zealand, Thailand, Taiwan and the Philippines
November 2014
Produced by UOB Global Economics & Markets ResearchJanuary 2015 64
Source: Bloomberg, IMF, UOB Global Economics & Markets Research (Annual Data)
2015 Economic Growth To Be Better For Various Countries
Selected Economies’ GDP Growth
3.8
3.2
6.5
5.85.5
3.3
5.9
7.4
3.3
2.73.0
1.4
0.8 0.7
2.9
3.63.5
0.7
3.4
5.15.4
6.0
3.53.73.94.0
5.2
7.2
1.01.11.5
2.6
0
1
2
3
4
5
6
7
8
World US
United
Kingd
om
Germ
any
Euro
zone
Japan
China
Philip
pines
Indi
a
Indo
nesia
Malay
sia
Thai
land
South
Kore
a
Hong K
ong
Taiw
an
Sing
apor
e
%
2014 2015
1.8% � 2.1%
6.2% � 6.3%
▲ ▼▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲▼ ▼ ▼
Produced by UOB Global Economics & Markets ResearchJanuary 2015 65
In Conclusion…
EU/Japan continues QE � Currencies↓
Higher USD and interest rates from June FOMC� Asian currencies weakness
Singapore: restructuring will be a continuous effort
US economic growth = cyclical/structural strengthtearing away from global growth trendsN
EA
RM
ED
IUM
LO
NG
Produced by UOB Global Economics & Markets ResearchJanuary 2015 66
Thank You!
About The SpeakerFrancis is an economist with United Overseas Bank’s Global Economics & Markets Research team and covers macroeconomic research on Asia. He provides regular economics commentary on TV and is frequently quoted in the media. Before joining UOB in 2012, Francis was an investment strategist at Phillip Capital where he used macroeconomics, business cycle theories, market timing and technical analyses to develop a systematic top-down investment approach for discretionary portfolios. Prior to that, Francis served as an Investment Manager in the wealth management arm of the Royal Bank of Scotland. His career also included stints as an economist at the Ministry of Trade and Industry and the Singapore Tourism Board, where he specialised in Tourism Economics.
Francis obtained the Bachelor of Social Science (Honours) in Economics in 2002 and the Master of Social Science in Applied Economics in 2003 from the National University of Singapore. Continuing his academic interests in the field of applied economics, Francis most recently contributed a chapter titled "Tourism Demand in Singapore: Estimating Neighbourhood Effects" in the Handbook of Tourism Economics published in 2013, and had just published a paper titled “Growth and Environmental Quality in Singapore: Is There Any Trade-off?” in the “Ecological Indicators” journal in 2014.
Produced by UOB Global Economics & Markets ResearchJanuary 2015 67
This presentation was prepared for informational purposes only and shall not be copied, or relied upon by any other person for whatever purpose. This presentation must be viewed in conjunction with the oral presentation provided by UOB and/or its officially appointed distributors/agents. Nothing in this presentation constitutes accounting, legal, regulatory, tax or other advice. The reader(s) of this document should consult his/their own professional advisors about the issues discussed herein. This presentation is not intended as an offer or solicitation with respect to the purchase or sale of any investment product and nothing herein should be construed as a recommendation to transact in any investment product. To invest, please refer to the prospectus (where applicable) for details.