Asias Export-Based Growth: A Thing of the Past

By Joe Kearns
Print Education Coordinator
Asian economies are going to find out that all good things must come to an end. Global market shocks like the fall in equity prices this month typically
hit emerging markets harder than developed markets and there is reason to doubt that Asian economies are destined to replicate their past export-
driven economic growth.

The UN Economic and Social Commission for Asia and the Pacific showed that export growth recovery in Asia-Pacific developing economies was
17.3% in 2010. Developing Asian economies, however, have become vulnerable to swings in the other direction largely because of their high depend-
ence on China.

China has experienced lower economic growth this year, which has hurt developing Asian economies that rely on regional trade. Chinas imports from
Asia rose just by 1.1% in the second quarter and fell by 4.3% in the first quarter. The Wall Street Journal provided data which shows the huge impact
China had on Asian exports:
While combined exports from seven of the regions top export economies China, Japan, South Korea, Hong Kong, Singapore, Tai-
wan and Thailand grew 12% to Europe in the second quarter on year and 6% to the U.S., their overall exports rose just 3.2%.

Asian economies reliance on exports has hurt them when market conditions do to lead to high exports. According to HSBC Holdings PLC, Asian pri-
vate consumption (excluding China) is growing at 4% annually, its lowest level since the early 2000s. Consequently, stocks of companies in emerging
markets that sell consumer staples like food and drinks are decreasing.

According to The Wall Street Journal, the broader MSCI emerging markets index is outperforming MSCIs index for consumer staples stocks by 3%.
Yet, shares of emerging-market consumer-staples companies are about twice as expensive as the broader market.

Although some investors are willing to pay a premium on consumer staples stocks because of their familiarity with various brands, it is clear that the
market has reached its breaking point for allowing these emerging market stocks to go up. What goes up must come down. Joe Kearns

Sources
http://www.un.org/apps/news/story.asp?NewsID=39139#.VEgYqvnF-Sq
http://blogs.wsj.com/economics/2014/08/15/china-damps-asias-export-rebound/
http://www.ft.com/intl/cms/s/0/d069c4e0-5517-11e4-b616-00144feab7de.html#axzz3GuMBYVAz
http://online.wsj.com/articles/investors-in-emerging-markets-cool-on-consumer-stocks-1413989754