Author Lays Out China's Best Case Scenario

Commodities exhibit a one decade up,two decades down cycle,notes Ruchir Sharma,Managing Director,Portfolio Manager and Head of Global Emerging Markets Equity Team at Morgan Stanley Investment Funds.China is the 100 pound gorilla in the commodity marketplace.
A China slowdown is a principal part of the commodity slowdown thesis.The best case for China is 6-7% growth.It's quite a shock for those who are used to 7-8% growth.It's a very natural slowdown.At a per capita income of 6,000 dollars a year,all developing economies slow down.
China is systematically deploying its wealth,but their debt to GDP is close to 200%.The reason for their slowdown is,the number of people entering the labor force and moving to cities is slowing down.It's demographics.It's like Japan in the 1970s.
We are now in a post-China world.Look to the Philippines,Indonesia and Thailand.For the first time,the Philippines now have a stable political leadership intent on increasing the country's wealth,Mr.Sharma pointed out.
Ruchir Sharma,CFA,is the author of the book "Breakout Nations."A Newsweek columnist and contributor to The Wall Street Journal,he has a BA in Commerce from Shri Ram College of Commerce in Delhi.
Morgan Stanley(MS)

Managing Director:Asia's New Rising Star

We expect the third and fourth quarter to look a lot better in China,said Nigel Chalk,PhD,Managing Director and Head of Emerging Asia Research at Barclays.In the end,they're gonna do more investment,more credit.Data show things are not as bad as people think.
India has much less room for maneuver.It's unclear how they're gonna turn around growth.We like the Philippines.They have a good fiscal and monetary policy side.On a lot of fronts,they seem to be the rising star.
Dr.Chalk was a longtime IMF official,most recently serving as Mission Chief to China.He received his Economics doctorate from UCLA and a MSc in Economics from the London School of Economics.
Barclays was named "Best Global Investment Bank" for 2011 by Euromoney magazine.
Hugh Young of Aberdeen Asset Management adds that Singapore has strong banks.Go with the strongest banks.Worry about the balance sheets,not the earnings power.
Barclays PLC(BCS)

Dell's Big Shift Means Profits

Dell Computer has shifted to being an end to end solutions provider of enterprise solutions and services,founder and CEO Michael Dell noted.As a result,cash flow rose to 5.5 billion dollars last year,and the company was able to initiate its first dividend of .08 a quarter.It also continues share buybacks.The steady cash flow and the shift we made should allow us to pay a dividend in perpetuity.IT is still the area where companies get productivity.The areas we can grow in are servers;storage;networking;and security.Our business is 80% commercial.The vast majority of our profits come from businesses,institutions and governments,with 19% from consumers.It's a split similar to that for the overall industry.
We're constantly introducing new products.The enormous amount of data needs to be secured and protected.We feel confident in our ability to grow the enterprise side of our business.We're investing organically and acquiring.The amount of data being stored is doubling every 18 months,and is expected to continue for the next five years.
You see a general kind of pause and caution now.Controlling cost is exactly the kind of thing we're focused on,Mr.Dell pointed out.
Founded in 1984,Dell's first international subsidiary was opened in the U.K. in 1987.In 1990,a manufacturing center was set up in Limerick,Ireland.International sales were growing exponentially by the late 1980s.Today there are manufacturing and solutions centers from Brazil to Malaysia and China.
Dell Computer(DELL)

Co-CEO:Logistics Business Strong

We've built a multi-billion dollar business in Japan,said Hamid Moghadam,Co-CEO and Chairman of Colorado-based industrial real estate firm Prologis.There is a need for modern large logistics buildings.As the market leader,we continue to be very optimistic about our prospects in Japan.We're promoting our high seismic standards of newer facilities that we build securely.There is increased demand from reconstruction.Even incomplete facilities are 70% leased.China is in the very early innings of building infrastrcture for logistics.I can see our business prospering in China for the next 20-30 years.The market is pretty remarkable.Recovery is probably most advanced in the U.S.There's 10% more people today than at the beginning of the financial crisis.We're growing rents in certain European markets.Latin America is simply on fire,and we cannot keep up with the demands of our customers,Mr.Moghadam observed.Prologis(PLD)

Chinese Service Sector Expresses Confidence

According to the China March HSBC Services PMI,or Purchasing Managers Index,business confidence hit an 11-month high.The survey registered a 53.3,which is slightly less than February's 53.9 reading;but a mark of greater than 50 still indicates growth in service-oriented businesses.New business expanded for the fortieth straight month.
Compiled by British financial data expert Markit for HSBC bank,the index showed firmer client demand;improved overall business conditions;and service firms being able to pass rising costs onto consumers.
Qu Hangbin,HSBC Chief China Economist,nonetheless thinks overall growth is slowing a bit-for instance,in export orders;industrial production;or employment.All these call for further easing measures,while inflationary pressures should remain relatively contained in the coming months.
Caution with regard to the March report is justified in that service sector growth was offset by manufacturing weakness and affected by state policies to cool growth in the real estate market.Indeed,service sector companies raised their staffing at only a fractional rate in March;and outstanding business,or backlogs,also rose marginally.
As well,despite the 11-month high in business confidence,the degree of optimism was weaker than the long-run trend for the survey.
All the same,survey respondents were expressing optimism,saying they would expand their companies and expected growth in the wider Chinese economy.China's official growth estimate for 2012 is 7.5%,an outstanding rate in comparison to the developed nations.
HSBC Holdings PLC(HBC)

Dow Chemical's Broad Solutions Network

Dow Chemical is a company that has long embraced globalism at every turn in its corporate life.
We're using Thailand as an operations hub these days,said Dow Chemical CEO Andrew Liveris.There are 160 Korean scientists at our R&D facility there.
The reception in China for global businesses is powerful.China is a red carpet;there are a lot of other economies that are red tape,the industry leader candidly observed.Dow is in 150 countries in terms of sales.
Obviously,Saudi Arabia is very important to a company like ours that is resource intensive,Mr.Liveris noted.
The firm employs about 52,000 workers worldwide.From Mexico to the Middle East,they produce more than 5,000 specialty chemical,advanced materials and other products at some 197 facilities in 36 countries.
Andrew N. Liveris,who turns 58 next month,is a native of Darwin,Australia.He graduated from the University of Queensland with a chemical engineering degree.Mr.Liveris was formerly general manager of Dow's Thailand operations.The Midland,Michigan resident also serves on the Board of Directors of IBM.
Dow Chemical(DOW)

Meeting the Future:Apple CEO Emphasizes China's Importance

Apple CEO Tim Cook has emphasized just how critical he considers China's importance to his company's growth is by visiting Beijing and meeting with the Vice Premier,Li Keqiang on Wednesday.Mr.Li said that China will strengthen intellectual property rights protection-a key Apple concern-and continue its economic transformation.
To be more open to the outside is a condition for China to transform its economic development,expand domestic demands and conduct technological innovation,Mr.Li continued.
For his part,Tim Cook promised that Apple will strengthen comprehensive cooperation with the Chinese side and conduct business in a law-abiding and honest manner.
Cheap Chinese knock-offs of Apple products have been a long-standing irritant to the tech giant.China,with its vast population still largely unconnected to the Internet,is a major prospect in Apple's future,the company has made clear.One of the company's major outsourcers,FoxConn,assembles countless Apple products in China.
Apple currently operates five retail outlets in China.The potential for expanding that side of the business alone is truly significant.It is estimated that 60% of China's population is unconnected to the cybernetic realm.
Apple is a massively successful company and stock,and it could be more successful,according to David Kirkpatrick,author of "The Facebook Effect."Its price to earnings ratio is not high for the industry,such as Amazon's.If for some reason this extraordinary growth should slow,they might want to make a strategic acquisition such as Twitter or Adobe,Mr.Kirkpatrick speculated.
With the untapped hordes of the upwardly mobile Chinese before them,that doesn't seem too likely in the near future,however.
Apple Computer,Inc.(AAPL)

Dell Computers:Serving the World;Managing Transformation

Dell's earnings per share and cash flow were up because we changed our business to be an end-to-end solutions provider,says Michael Dell,founder and CEO of the multinational Dell Computers.We're growing our R&D expenditure along with cash flow.
Our growth is both organic and inorganic.You'll continue to see us active in both.We acquired 18 businesses the last three years.We gained share across the board.We're number one in servers in the U.S.,China and India.Our margins grew 370 basis points in the past year.Our job is to do it again this year.
With all these mobile devices,the amount of data is doubling every 18 months.We're building data centers of the future that take in all the data and feed all those devices.There's lots of opportunity in the ecosystem that Dell participates in.There's a lot of demand for a Dell/Windows tablet.We'll be there right on the very first day that Windows 8 is available,Mr.Dell promised.
Dell has a presence on six continents,with facilities from Canada to Qatar and beyond.In the U.S.,the company has launched a national command center with the Red Cross.It's a social media command center for humanitarian purposes,to redirect resources,people and tools through social media.We're really proud to be putting this in place,Michael Dell added.
Dell Computers,Inc.(DELL)

Asset Manager:Fairly Good News Ahead-and what limits it

I think we're going into a fairly good news economy,said Christian Thwaites,CEO of Sentinel Investments.The regional Federal Reserve Banks reported gains;exports and imports look good.It's gonna be difficult to get beyond 2.5-3% growth,however,because the government is a drag on the economy.
Manufacturing has posted some very impressive productivity numbers.That's the way employers would rather grow,than by hiring more people.The employment picture is only gonna improve very,very gradually.
The inflation number is not a problem.Inflation in China is not down to a point they are comfortable with.There is definitely a very robust consumption story from China.
It's a more subdued consumer recovery in the U.S.Play it carefully.Choose very good,solid,well-managed consumer discretionary companies if that's where you're going to go.You're only going to see 3-5% growth,rather than the 7-8% you saw during past recoveries,Mr.Thwaites noted.
Since 1934,Sentinel Investments has grown to manage more than 18 billion dollars in mutual fund and institutional accounts.As a provider of core,back to basics strategies,standing the tests of time is their criterion for success.

Asia Executive:ASEAN Region Looking Robust This Year

The ASEAN Region-the Association of Southeast Asian Nations and its environs-is growing 5-5.5% this year,according to Stuart Dean,President,ASEAN Region at General Electric.We grew 30% there last year,and we expect double digit growth again this year.
All the businesses had a good year in 2011,and it looks similar this year.GE Aviation had a strong year,and we're gonna be pretty big this year as well.
I think the China landing is likely to be soft.For the next 4-5 years,ASEAN is likely to see growth of 5-6%.There's a lot more opportunity to sell locomotives in ASEAN.The living standards increase,and infrastructure plays a big part in that,Mr.Dean explained.
Stuart Dean has a B.A. in Economics and Political Science from Duke University,as well as an MBA from Harvard University.ASEAN has 10 members,including Indonesia,Malaysia,Singapore and Vietnam.
General Electric(GE)

Executive Warning:China Dominant in Rare Earth

Michael Silver,Chairman,CEO and President of American Elements,a global manufacturer of engineered and advanced materials,including rare earth metals and chemicals,has been pleading for the establishment of a U.S. strategic metals reserve(SMR).China is currently dominant in the field,with 95% of the world's rare earth production.
In the event of an embargo on rare earth,U.S. manufacturing would grind to a halt.The strategic metals are crucial for everything from televisions and cell phones to fiber optics,computer hard drives,wind turbines,lasers and night vision goggles,as well as radar transmitters and GPS systems in the military realm.
In the past year,the cost of rare earth has risen more than 25-fold.South Korea,Japan,the EU and U.K. have their own plans for national stockpiles.
The military does need to do an assessment of what its needs for rare earth are for six months or a year.Clearly a politically strategic asset,China has command of most of these materials,putting it in the position of being the Middle East of the 21st century,controlling the alternative energy sources,such as solar panels and hybrid batteries,that are so reliant on rare earth,in Mr.Silver's opinion.
The U.S. has only one open pit mine in Mountain Pass,California,which belongs to Molycorp.Molycorp has just sold 12.5 million shares to a Chilean firm,Molibdenos y Metales S.A.,for 390 million dollars-a 13% stake in the company.
American Metals is based in Los Angeles and has manufacturing and warehouse facilities in the U.S.,China,Mexico and the U.K.
Molycorp(MCP)

Author and Consultant:Riding the Sawtooth Market

We're in a slow growth,maybe no growth economy,and this could go on for years,observes Al Angrisani,former Assistant Secretary of Labor and Chief of Staff for President Ronald Reagan from 1980-84,whom he helped to create 16 million new jobs.Investors are picking winners and losers.If the price is down,I'll make a bet on those.
You're looking at IBM,Apple,Siemens.Those are good long-term plays.We're in a sawtooth pattern,but the trend is down.You're picking companies.You get numb from the ups and downs of this sawtooth pattern,and then perhaps you get whammed by China with its uncertainty.
Mr.Angrisani has worked as a turnaround expert,restoring value to shareholders as founder of Angrisani Turnarounds,LLC,a leading consultancy for failing publicly traded companies.He sets out his approach in his book "Win One for the Shareholders!"
Siemens(SI),International Business Machines(IBM),Apple(AAPL)

Venture Capital In China

Chinese stocks are over-amplified according to what U.S. markets are doing,in David Chao's view.Mr.Chao,who is co-founder and general partner at venture capital firm DCM,says the stocks are perceived as higher risk.In reality,Chinese listed companies in the U.S. are just as transparent as U.S. companies.They have to follow the same rules.
Chinese entrepreneurs and management are learning day by day.China is characterised by its 500 million Internet users and the burgeoning rise of their middle class.They are starting to spend money.That's a great opportunity.We have a local team in China,and also teams in Japan and the U.S.That's the best way to do it,Mr.Chao believes.
DCM invests in mostly early stage companies in core technology sectors such as Cleantech;Components;and Software and services.Some of its projects include About.com,Pay Cycle and RenRen(RENN).

Advantage View:Market Thoughts From UBS

We have a dichotomy in the market:1.We need to see better macros,and 2.We need to see something better out of Euro policy makers.Our bias is to believe that the longer this continues,the weaker the numbers will be;our bias is to the downside.
We need more clarity out of policymakers,both U.S. and European-but especially European.I'll believe it when I see it.We haven't seen any evidence they are taking concrete measures.Given the 17 parliaments,it's by definition a slow process.
We favor U.S. equities such as consumer staples and defensive cyclicals such as tech.There's a lot of risk with industrial cyclicals and energy.Materials and industrials are lagging.
Over the next year or two,China will see 7-8% growth.It's not falling off a cliff,but slowing.Near term,event risks out of Europe and decelerating GDPs get us quite concerned about global equity markets.Medium term,we are constructive on equities.
Jeremy Zirin is Chief Equity Strategist at UBS Financial Services.UBS offers wealth management,investment banking,asset management and business banking services to clients worldwide,as well as retail banking in Switzerland.

The Outlook for Chinese Equities

The global growth slowdown is much on the minds of financial analysts in Asia.HSBC says a fall in demand is already affecting countries in the region.China,India and South Korea are export-driven.China Daily said the European debt crisis will affect China's real economy.
Nonetheless,the major brackets are doing well,according to John Tang,a China strategist at UBS.I don't think we are gonna see earnings affected very much.If we still see 8-9% growth,bank earnings won't be much affected.The outlook for the index is actually quite good.
The Japanese yen or bond are not an option,and the euro is even worse.The U.S. dollar will still be a must have.
Real estate is the most upbeat sector.Earnings are very robust;valuation has been quite low.It is the number one consumer sector in China.Look past the short political headwinds.I don't think we should be trading at that low level,Mr.Tang observed.

Shortfall of Rare Earth Elements Persists

Molycorp is the sole producer of rare earth oxides in the Western Hemisphere.The Mountain Pass,California company has reached profitability,and CEO Mark Smith indicates that the condition out of China is driving his company.The supply side is not nearly strong enough to meet the demand both in and outside of China.
We're seeing not just price realisation,but a volume increase as well.We see the demand continuing to climb very rapidly.China cannot produce enough for their own in country needs.
A 30-35,000 ton supply of rare earth is needed per year.Molycorp puts out 5-6,000 tons for its customers.We are fully funded to close the Sumitomo deal,under which Sumitomo Corporation of Japan will provide Molycorp with financing in exchange for a seven year supply of rare earth products.We certainly would like to enter into contracts.
We have to stay focused on our 781 million dollar expansion project.It is the number one priority for every employee in the company.We have to bring that project in on time and within budget.That's what people invested in Molycorp for.
We don't foresee any let up in demand for rare earth elements,Mark Smith noted.The oxides,considered critical by industries such as aerospace and defence,are utilised in diverse applications such as lasers;computer memory;aerospace components;magnets;batteries;and PET Scan detectors,as well as X-ray components.
Molycorp(MCP)

Thriving in China:Hang Lung Properties,Ltd.

Ronnie C. Chan,Chairman of Hang Lung Properties,Ltd.,a Hong Kong-based developer,owner and manager of upscale real estate,thinks the government is finally heading in the right direction after 10 years,releasing more land for sale.We are not forced to sell,with more than 10 billion dollars in cash.I don't think this is the time to sell.
We want to be in commercial.The problem is,the government is building a lot of subsidised housing,driving residential developers into the commercial field.Wages are a big issue,not construction costs.
We're building five mega malls,but China can still pass increases on us.There are no fixed contracts in China.We are opening one in Xinan.It is fully leased six months ahead of opening.
As for expanding outside of China,Mr.Chan says he doesn't think he is smart or foolish enough to look elsewhere.
Hang Lung Properties is a constituent stock of Hong Kong's Hang Seng Index.It is one of the largest real estate companies in the world.Its holdings in Hong Kong and mainland China include malls,office buildings and both serviced and non-serviced apartments.
iShares MSCI Hong Kong Index Fund(EWH)

Investing in Emerging Markets

According to Nicholas Smithie,emerging markets strategist at UBS,the emerging markets have had a splendid decade.We know there is an overhang about sovereign debt.They are trading lower than 75% off other periods,pricing at distressed valuations.We think investors go for them for their high rate of domestic growth.
In the emerging markets,domestic consumption and infrastructure are really starting to take off in Thailand,Indonesia and the Philippines.Investor holding periods have become very short:they want all their returns all at once.Those in it for the long haul will benefit.
We think that Chinese equities have fallen to very low valuations,pricing in a hard landing.In the second half of the year,Chinese growth will come through.We'd be buying,Mr.Smithie advised.
China has just raised interest rates for the third time this year,a sign that growth is still so strong,even with the tightening measures already taken,the government is afraid of the economy overheating into more inflation.
UBS offers wealth management,asset management and investment banking globally,as well as retail banking in Switzerland.Founded in 1854,it is based in Zurich and Basel,Switzerland.UBS has offices in more than 50 countries.
UBS AG(UBS)

What Drives Molycorp Minerals

Molycorp Minerals describes itself as the Western Hemisphere's only producer of rare earth oxides.The price of rare earth metals has appreciated markedly recently,and CEO Mark A. Smith says this is largely driven by an increased volume of sales at a time of tight supply and demand.
We really are not seeing any slowdown in China and India.We are right on schedule with our new mine.It is to be fully producing by the end of 2012.
Every person we talk to continues to indicate that China will continue to lower its export quota of rare earth metals.The number of opportunities in this business are more than I've seen in my 24 years in this business,Mr.Smith noted.
China supplies 97% of the world supply of these essential materials,but has been cutting back on exports for some time now.Rare earth metals are used in high tech applications such as fiber optics,lasers and hard disc drives,as well as hybrid vehicles,green energy,national security and water treatment applications.
Molycorp Minerals is headquartered in Greenwood Village,Colorado.
Molycorp Minerals(MCP)

Private Equity:A Blackstone View

Europe has been slow,in the estimation of Stephen Schwarzman,CEO of The Blackstone Group,L.P.,but we're starting to see Europeans now liquidating things in a way that wasn't previously the case.What we're seeing is sort of spotty growth in Europe.Overall this year,growth should be about 1.5%.
Europe for us used to be very high-priced.We look at Europe in a position of healing now.The consensus of finance ministers is slow growth,strengthening of the rescue fund,and life will go on.
China prices have gotten very high.There's no shortage of money in China,and there's a lot of optimism.In India,there isn't so much money around.They are actively looking for money,so there are a lot of opportunities we like,such as coal-fired electric plants,Mr.Schwarzman indicated.
What we're seeing in every area of our business is,there's always an unusual opportunity where it isn't very difficult to make a decent return,the financier said last weekend at the World Economic Forum in Davos,Switzerland.Blackstone is gonna be a whole lot more active this year.
The Blackstone Group,L.P.(BX)