By Elsa Pau
Publisher and Editor-in-Chief
I have always wondered that if culture and social was part of asset allocation’s decision making how would one’s portfolio be allocated, and how market performance should be attributed to these factors. How one market rebounds from adversity and how one stays at the bottom forever?
Despite the worst sentiment at the opening of the year, I closed my eyes and took advantage of the falling Yen and went on long an overdue holiday in Japan. As visitors we’ve enjoyed the paradise of human respect and the best hygiene, Mother Nature’s gifted scenery and a most enjoyable shopping spree, but also a country with the strongest connection to the past. I can’t help but noticing the period this country has stayed tumbled, compared with the rest of its developed peers, and that what had once taken Japan to become a world leading economy has gradually faded. The highly disciplined Japan continues to stay in comfort and obedience while watching its ranking of GDP (US$ 4,667.6 bn) fall to the fourth place after India (US$ 6,776 bn) and China (US$ 16,149.1 bn). Yet, there was little desire for people to take risks in businesses, think creatively and to drive innovation.
The US on the other hand has gone through multiple challenges year after year, and yet they managed
to survive and excel. The culture of high energy, creativity, and innovation has incubated sustainable
enterprises such as eBay, Google, Amazon, and a thousand more other ones which practically started with no or very little capital. Despite the mess the Republican government left its citizens 6 years ago, the US labour market as of today has been the strongest since 1990, creating two million net new jobs over the past seven months, and is still the world’s leading economy with GDP at US$ 16,768.1 bn, but with China quickly catching up. The EU in general, a combination of 28 member states with most underperforming and people taking the priority of living a better lifestyle, could find fighting a bad economy difficult. The Union has less employment than the US, they work less hours and receive more paid annual leaves than the Americans. Topping that are other issues such as geopolitical and monetary policy, which will continue to create pressure for the euro. Latin America in general has gone back into hibernation after a few boosters from influx of capital a few years ago. With a dominating culture of food, arts and music, the region continues to suffer from ongoing poverty and labour abuse by employers, due to fear of unemployment. Education and CPI level remain one of the lowest amongst its emerging market peers. Aided by officials, corruption has remained active and ratings static, with very little improvement over the years. The region continues to be a hub for drug trafficking and organised crime. Closer to home, Hong Kong and China are undergoing major cultural transitions where both systems – the Common Law and the Basic Law – are fighting a historical and bloody battle. Hong Kong’s future is fading as this generation surrenders control of their future to blames and complaints, while citizens on the other side of the border are grasping every opportunity to break out of poverty. Apart from the lack of creativity and manufacturing, Hong Kong has been enjoying the biggest GDP contribution from sectors in wholesale and retail trade (23%), real estates and businesses combined (21%) and financial services (16%). Sustainability, however, is questionable with ongoing internal unrest and lack of motivational drivers.
I have come to a conclusion that despite the strongest inflow to a market, a country’s economy and GDP is ultimately sustained by the people who live and work there, and not by foreign investments that come and go. I believe every country has a dominating culture that translates into the outcome of their economy. Reading between these lines could perhaps help laymen investors make a safer bet when directions are blurry.