Emergence of a New World Order - America is a USD 12 trillion economy and China a USD 5 trillion (at 200 prices adjusted for Purchasing Power Parity) and it is believed China would catch up with America by the end of this decade. America is scared over sharing its dominance with its biggest creditor and China is acting with increased confidence and authority at the world level much to the discomfort of America and its allies. I am bullish on India, bearish on America and would buy a put on China.
Currency Realignments – Weaker western currencies (Dollar, Pound and Euro). Stronger Yen and Yuan; pressure on Euro over financial health of some of Euro Zone member countries. Emergence of Yen and Yuan as alternate currencies for reserves and oil payments. Bullish on Gold and Oil.
"Nearshoring" – Oil spike and Yuan appreciation will make China loose its cost leadership in manufacturing. Americans might do "Nearshoring" by set up manufacturing base in Mexico. "Mexico could be the next China".
GDP Growth Rates – China to moderate to a growth rate of around 7-8 % (appreciating currency, falling exports, anti dumping duties, more competition in manufacturing from other emerging markets). India will accelerate its growth by 100-200 basis points (provided successful implementation of GST, Direct tax code and disinvestment policy. GST itself is expected to add around 75 basis points to annual GDP growth). India will emerge as a high quality manufacturing hub. America will be like Japan of 90 s and face stagflation at home.
Outperforming Equity Markets (Emerging Economies) – Indonesia, Mexico and Chile Equity Markets will outperform other emerging economies due to low base effect and high commodity prices. Indian and Chinese equity markets will have a sustained growth due to high GDP growth rates. Hedge Fund and Private Equity will dominate M & A activity in BRIC economies.
