ASIA PACIFIC DIGITAL & TALKING HEADS
My colleague Chris Wood, who was the Tokyo Chief for the Economist and famously wrote “The Bubble Economy” about Japan’s legendary boom and bust late last century, refers to the newscasters at channels like CNBC as Talking Heads. An expert on emerging markets, Chris has a great turn of phrase, and he’s one of the best equity strategists around today.
I was watching the Talking Heads in the gym this morning and when they announced (in their words) a watershed moment – the mighty Intel has ceased being a growth company. To paraphrase the babble, “we are mature, we can’t move the dial by growing quickly anymore, so we are giving it all back to shareholders.” Or something like that.
In the same stream of consciousness the Talking Heads delivered sound bytes on a breathtaking array of subjects – the proposed IPOs of Line and Alibaba, how Yahoo’s market cap is worth less than the value of its its Alibaba holding, Janet Yellen’s comments on small social media stocks being overvalued. Keep up, Roger.
Then came the really interesting comment – a guest on the show delivering a sound byte about the wealth effect in emerging countries like Indonesia when nominal GDP per capita crosses the magic $4,000 per head mark.
That’s a lot of intel to take in (excuse the pun). As I assimilated what I could on the cross trainer (at HR 136) I tried to work out what it all meant meant for me as an investor and for the people for whose money my firm is custodian.
It’s the GDP per capita discussion that really resonated – forget the noise around the Fed or Intel. Let me explain.
The experts tell us that when a country’s per capita GDP breaches $4,000, consumption of essentials like energy and food goes ballistic and services become the new driving force of economic growth.
I quickly toweled off (keep focussed, remember this all happened at the gym!) and checked out the GDP per capita of a few Southeast Asian markets and some familiar developed economies as a cross-check. And here we are:
- Developed economies: Australia $67,869, USA $53,101, Singapore $49,936.
- Developing Asian economies: Malaysia $10,579, Thailand $6,572, China $6,070, Indonesia $3,660, Philippines $2,462, Vietnam $1,523
Then I overlaid some digital factoids:
- 55% of the world and 48% of the word’s internet users live in Asia Pacific.
- As do 52% of global social media users and 48% of all mobile users.
- One billion Asia Pacific residents access social media on their mobile device.
- 17 Southeast Asian countries have higher mobile subscription rates than the USA.
- Time spent on the internet in Indonesia and Singapore beats the USA.
- Growth rates in digital commerce and advertising will exceed 35% pa for the next several years if not more in many markets
(…note these numbers came from several sources, and some may be out of date or open to different interpretation).
And so on. It’s a big market and it’s growing fast off a low base with a hugely favorable economic backup drop. You get the picture.
To my mind, none of us should worry too much about Intel, or about Mrs Yellen’s accomodative monetary policy settings as much as we should worry about getting properly set up in these Asian markets (unless of course the West faces another existential crisis, in which case we should all probably hide in a cave for a while, buy shares in the Remington Arms Company and Nestle).
Why? Because it’s all on in Southeast Asian digital. And it will be for decades.
At this point there’s a ton of work to do but I’m really pleased we just signed up for that 120 seat digital operations hub in Manila last week. And I’m even more pleased I just asked Genevie to book me on that flight to Jakarta next week to start recruiting.