Marko Papic Managing Editor Geopolitical Strategy Geopolitics: Risks & Opportunities In 2013 January...

Marko PapicManaging EditorGeopolitical Strategy

Geopolitics:Risks & Opportunities In 2013

January 2013

GLOBAL FORECAST: More Sunny Breaks in 2013

General theme: policy is a tailwind Europe: a ‘Red Herring’ Middle East: overstated U.S.: don’t expect miracles East Asia: risks understated

EUROPE: Where is the collapse?

© BCA Research 2013

8

4

0

-4

-8

-12

2010 2011 2012 2013

8

4

0

-4

-8

-12

CYCLICALLY-ADJUSTEDPRIMARY BUDGET BALANCE*:

ITALY GREECE SPAIN IRELAND PORTUGAL

% OfGDP

% OfGDP

* SOURCE: IMF FISCAL MONITOR (OCTOBER 2012).

2000 2002 2004 2006 2008NOTE: VERTICAL LINE DENOTES JANUARY 2005, WHEN HARTZ IV LABOR REFORMS TOOK EFFECT; SOURCE: ILO.

400

300

200

100

400

300

200

100

GERMANY:TOTAL HOURS LOSTTO LABOR ACTION

ThHrs.

ThHrs.


Implementation phase

Hartz IV negotiation phase

EUROPE: Investment Opportunities

4


125

100

75

50

1975 1980 1985 1990 1995 2000 2005 2010

125

100

75

50

OVERALL EQUITY MARKET*: EURO AREA RELATIVE TO U.S.

* REBASED TO JAN. 2008 = 100; EXPRESSED IN COMMON-CURRENCY TERMS.




7.0

6.5

6.0

5.5

5.0

4.5

2012

7.0

6.5

6.0

5.5

5.0

4.5

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

ITALIAN 10-YEARGOVERNMENT BOND YIELD

% %

8.0

7.5

7.0

6.5

6.0

5.5

5.0

2012

8.0

7.5

7.0

6.5

6.0

5.5

5.0

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

SPANISH 10-YEARGOVERNMENT BOND YIELD

% %


MIDDLE EAST: Iran-Israel Conflict Is Key (But Overstated)


20,000

15,000

10,000

5,000

IND

IANUMBER OF PUBLISHED SCIENTIFIC AND TECHNICAL JOURNAL ARTICLES

BR

AZ

IL

TU

RK

EY

IRA

N,

ISL

AM

IC R

EP

.

ISR

AE

L

DE

NM

AR

K

FIN

LA

ND

SO

UT

H A

FR

ICA

PA

KIS

TA

N

NOTE: SCIENTIFIC AND TECHNICAL JOURNAL ARTICLES REFER TO THE NUMBER OF SCIENTIFIC AND ENGINEERING ARTICLES PUBLISHED IN THE FOLLOWING FIELDS: PHYSICS, BIOLOGY, CHEMISTRY, MATHEMATICS, CLINICAL MEDICINE, BIOMEDICAL RESEARCH, ENGINEERING AND TECHNOLOGY, AND EARTH AND SPACE SCIENCES.SOURCE: WORLD BANK.

U.S.: A HOUSE DIVIDED

6© BCA Research 2013

SOURCE: POOL, ROSENTHAL, ET AL. (2011). DATA USED FOR POLARIZATION ANALYSIS USES NOMINATE (NOMINAL THREE-STEP ESTIMATION), A MULTIDIMENSIONAL SCALING METHOD DEVELOPED TO ANALYZE PREFERENCE AND CHOICE. THE TWO DIMENSIONS USED IN THIS METHOD ACCOUNT FOR THE GREAT BULK OF ALL ROLL CALL VOTING IN THE U.S. CONGRESS OVER ITS HISTORY. THE PRIMARY DIMENSION (X-AXIS) IS THE LIBERAL-CONSERVATIVE SPECTRUM ON THE BASIC ROLE OF THE GOVERNMENT IN THE ECONOMY. THE SECOND DEPENDS ON THE ERA, PICKING UP REGIONAL DIFFERENCES ON A NUMBER OF SOCIAL ISSUES SUCH AS THE CIVIL RIGHTS MOVEMENT. THE DATA ILLUSTRATES THAT THE SECOND DIMENSION HAS DECLINED IN IMPORTANCE, WITH SOCIAL ISSUES NOW LARGELY CONSIDERED WITHIN THE LIBERAL-CONSERVATIVE SPECTRUM OF THE PRIMARY DIMENSION. THE PRIMARY DIMENSION NOW ACCOUNTS FOR APPROXIMATELY 93% OF ALL ROLL CALL VOTING CHOICES AND THE TWO PARTIES ARE HIGHLY POLARIZED ON THIS SPECTRUM.


CHINA: Domestic Pressures For Reform

7

2010 GDP PER CAPITA (IN USD)

10,000

8,000

6,000

4,000

2,000

SOURCE: CEIC AND IMF WEO.

NOTE: BLACK DENOTES COASTAL PROVINCES, BLUE DENOTES INTERIOR PROVINCES, AND RED DENOTES SOVEREIGN COUNTRIES.

SH

AN

GH

AI

BE

IJIN

G

BR

AZ

IL

TIA

NJ

IN

ME

XIC

O

JIA

NG

SU

ZH

EJ

IAN

G

SO

UT

H A

FR

ICA

INN

ER

MO

NG

OL

IA

GU

AN

GD

ON

G

LIA

ON

ING

SH

AN

DO

NG

FU

JIA

N

TH

AIL

AN

D

JIL

IN

CH

INA

HE

BE

I

HU

BE

I

CH

ON

GQ

ING

SH

AA

NX

I

HE

ILO

NG

JIA

NG

NIN

GX

IA

SH

AN

XI

XIN

JIA

NG

HU

NA

N

HE

NA

N

QIN

GH

AI

HA

INA

N

JIA

NG

XI

SIC

HU

AN

AN

HU

I

GU

AN

GX

I

IND

ON

ES

IA

TIB

ET

GA

NS

U

YU

NA

N

GU

IZH

OU


EAST ASIA: Geopolitical Tensions Understated

8

4

3

2

1

04 06 08 10 12

4

3

2

1

3

2

1

3

2

1

VIETNAMBn

USDBnUSD

THE PHILIPPINES

BnUSD

BnUSD

NOTE: BOTH SERIES SHOWN SMOOTHED.

USD USD

BnUSD USDTOTAL TRADE WITH:

CHINA U.S.


20

16

12

8

04 06 08 10 12

20

16

12

8

28

24

20

16

12

28

24

20

16

12

SOUTH KOREABn

TOTAL TRADE WITH: CHINA U.S.

JAPAN

Bn

NOTE: BOTH SERIES SHOWN SMOOTHED.


Bn

JAPAN: Opportunities Exist

9


500

450

400

350

300

250

200

150

100

2007 2008 2009 2010 2011 2012

500

450

400

350

300

250

200

150

100

CENTRAL BANK TOTAL ASSETS*

FED BoE ECB

BoJ

* SHOWN REBASED TO JAN. 2007 = 100.

.22

.20

.18

.16

.14

.12

2008 2009 2010 2011 2012 2013

2.0

1.8

1.6

1.4

1.2

1.0

.8

JAPAN RELATIVETO SOUTH KOREA:

EXPORTS TO THE WORLD (LS)

EQUITY PERFORMANCE* (RS)

* LOCAL CURRENCY TERMS. SOURCE: MSCI INC. (SEE LAST PAGE).


Marko Papic Managing Editor Geopolitical Strategy Geopolitics: Risks & Opportunities In 2013 January...

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