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Globalisation & The Investor

Globalisation & The Investor. Hans Kunnen Head of Investment Markets Research May / June 2001. Agenda. What is globalisation? Some impacts of globalisation Tax and Technology What to look for Engaging the globalising world. Ally McBeal. Globalisation and culture.

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Globalisation & The Investor

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  1. Globalisation & The Investor Hans Kunnen Head of Investment Markets Research May / June 2001

  2. Agenda • What is globalisation? • Some impacts of globalisation • Tax and Technology • What to look for • Engaging the globalising world

  3. Ally McBeal Globalisation and culture

  4. Globalisation - what is it? World Trade Organisation

  5. Global brands affect our daily lives

  6. What is globalisation ? ‘Globalisation refers to the increasing interdependence of the world’s investment markets, evidenced by the decreasing importance of regional barriers and the existence of a global labour market.’ Source: International Monetary Fund

  7. Globalisation is evidenced by…

  8. 20 15 10 5 0 1820 1870 1913 1929 1950 1973 1992 1999 Exports as a % of GDP Source: OECD and Globalisation: Baker, Epstein and Pollin

  9. Tariffs continue to fall... Source: International Monetary Fund

  10. Deregulation of financial markets

  11. 1000 800 600 400 200 0 1982 1990 1999 Foreign Direct Investment - $b (current prices) Source: UNCTAD World Investment Report 2000

  12. What are businesses and investors doing?

  13. 700 600 500 400 300 200 100 1990 1995 1997 1998 1999 Cross-border Mergers & Acquisitions $b (current prices) Source: UNCTAD World Investment Report 2000

  14. Cross regional mergers • Daimler-Benz (Germ) + Chrysler (US) • Deutche Bank (Germ) + Bankers Trust (US) • AT&T (US) joint venture with British Telecom (UK) • BP (UK) + Amoco (US) • Scottish Power (UK) + Pacificorp (US) Regional boundaries are now blurred...

  15. Multi-regional revenue streams Revenue external to home region • Toyota (Japan) 49% • Sony (Japan) 68% • Glaxo (UK) 65% • Coca Cola (US) 70% • Adidas (Europe) 70% • News Corp (Aust) 90% Source: Companies

  16. Australian companies overseas earnings News Corporation United States 74% United Kingdom 16% Australasia 10% Lend Lease Corporation United States 27% Europe 18% Australia & Pacific 52% Asia 3% BHP United States 14% Australia 62% Asia 11% South America 8% United Kingdom 4% Other 1% National Australia Bank Australia 52% United Kingdom 23% United States 13% Ireland 11% Asia 1% Source: Bloomberg

  17. 140 120 1990 1994 1998 100 80 60 40 20 0 USA UK France Spain Germany Italy Japan Direct and portfolio investment abroad as a % of GDP Source: OECD, IMF, BIS

  18. Foreign investment grows and grows… $billions of dollars (AUD) Data to 31/12/00 Source: Australian Bureau of Statistics

  19. Trends in superannuation 40 35% Offshore assets of Australian super funds, % 35 30 25 20% Projections 20 15 10 5 0 1995 1997 1999 2001 2003 2005 Source: DB Global Markets Research, APRA

  20. Dec Australian shares International shares Equity returns 1997 12.2% 39.1% 1998 11.6% 30.6% 1999 16.1% 15.8% 2000 4.8% 0.0% Avg 11.2% 21.4%

  21. Global equity returns Calendar years ending 31 March 2001 Note: Returns in Australian dollar with Net dividends reinvested Source: MSCI

  22. Choice of listed companies And don’t forget bonds / fixed interest Source: international Federation of Stock Exchanges

  23. Globalisation and Taxation • Added tax paperwork - no tax harmony • Withholding taxes • Foreign tax credits • US - W8 BEN forms - are you undesirable? • FIF legislation - $50,000 threshold • Capital gains • Gearing cost issues

  24. Colonial First State Investments • Global Shares Fund • Global Resources Fund • Global Technology & Communications Fund • Global Health & Biotechnology Fund

  25. Building a franchise - RadioShack & brand/leveraging an existing one Pricing Power - Vodafone Group Plc Dominant global trends/secular growth - First Data Corporation New market/increased market share - Ryanair Holdings Capacity cycles - Harley Davidson Global Share Fund - “Global Growth Plus”

  26. Top holdings as at March 2001 Global Technology and Communication Verizon Communications 5.48% Barra Inc 5.21% Nvidia Corp 4.18% Avocent Corporation 3.94% Portugal Telecom SGPS SA 3.50% Global Health and Biotechnology Pfizer Inc 7.03% Pharmacia Corporation 6.88% American Home Products 4.29% Aventis SA 4.10% Bristol-Myers Squibb Company3.86%

  27. Top holdings continued…. Global Resources Broken Hill Proprietary Company 9.28% Rio Tinto Limited 7.98% Alcoa 6.59% WMC Limited 5.15% Ocean Energy Inc 4.93%

  28. Globalisation and currency risk 1.2 The USD / AUD exchange rate 1 0.8 0.6 0.4 Jun.1980 Jun.1986 Jun.1992 Jun.1998 Jun.2004 Source: Iress

  29. Technology

  30. Globalisation - the impact of technology ‘Distance is no barrier’ • ‘Global’ television - CNN, CNBC • Internet - online share trading, research • e-mail • Video teleconferencing via internet • Fax • Electronic transactions - Visa, Mastercard etc • Phone - try talking to people!

  31. Globalisation, technology & falling prices 1933 1970 1990 2000 • 3 minute phone call New York to London $470 $62 $6 13c • Air travel (revenue per mile) 68c 32c 11c 8c • Cost of standard computer ($000’s) 12519 3.5 1.5 0.5

  32. Internet penetration rate Percentage of total population connected to the internet July - September 2000 Source: Nielsens Netratings, eMarketer, Asia Internet News, Nua Internet Surveys, US Census Bureau.

  33. Australia - a small position in the global sharemarket Source: MSCI ACWIF, 31 Dec 2000

  34. Pension fund asset allocation Sources: 1 The WM company. 2 National Bank of New Zealand. 3. Alaska State Pension Investment Board 4. American Association of Individual Investors

  35. Engaging the globalising world

  36. Globalisation, change and fear • Loss of control over national resources • Privatisation - change of status quo - job losses • Deregulation - market forces rather and government committees • Foreign workers in Europe • Low wage jobs move offshore

  37. Engaging the globalising world - option 1 Rebuild tariff walls Keep foreigners out

  38. Engaging the globalising world - option 2 Oppose globalisation (free trade and multi-nationals) but want social issues internationalised (human rights , the environment)

  39. Engaging the globalising world - option 3 Support globalisation but against international laws and bodies

  40. Engaging the globalising world - option 4 Economic and social openness

  41. In summary... • Globalisation is upon us • Globalisation opens opportunities • Globalisation does not make investing easier • Globalisation is a challenge we must rise to meet

  42. Disclaimer This information has been prepared without taking into account your particular financial situation. Before making an investment decision based on this advice, you should assess your own position, and if appropriate, seek the assistance of a financial adviser. An application for any fund mentioned in this presentation can only be made on an application form attached to the relevant current prospectus available from Colonial First State Investment Managers (Australia) Limited (which in the case of managed investment funds has been lodged with ASIC).

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