By Singular Vision - By Teoh Kok Lin | Sep 7, 2010
Europe embracing Asia’s growth, spending power
EVEN in mid-August, the cool London breeze reminded me that I packed too lightly. In contrast to the chilly wind, London (and Paris) I must say is really busy and full of energy; it is hard to believe that data are showing the United Kingdom and Europe’s economic growth are both slow, handicapped by huge debts at both government and private levels.
Surprisingly, London property prices today are booming (again?). Newspaper articles are full of stories about buyers’ blues and the challenges of buying property in London. Rich Russian, Arab, Indian and Chinese buyers are plentiful – money is no object and I guess it should not be, given that governments worldwide seem to be printing so much money – there are only so many luxury houses in Mayfair, Chelsea and Kensington up for sale.
I was in London and Paris to meet up with fellow investment professionals and institutional investors. Our discussions revealed, among other things, some of their thoughts on the global economy now and going forward.
One key takeaway was big concerns about Western currencies continuing to weaken (due to United States and Europe’s slower economic growth). Therefore, to help promote exports and cheaper imports, Western governments will likely prefer their currencies to stay weak.
Similarly, Western governments will stick to low interest rate policies in the near term, to help promote economic activities and manage high government and private debts (as an interesting side note, some banks in the United Kingdom for example, are paying 0.8% interest per year for pound sterling three-months fixed deposits and 0.04% interest a year for savings account).
Search for Asian investments
It is, therefore, not surprising to note that European investors are very interested in Asia’s economic growth and strengthening currencies. I believe many investors in the United States and Europe are actively looking for good Asian companies to invest in.
One bright spot in Europe is the continuing large inflows of Asian tourists and their increasingly high spending power, even though in 2009, Europe’s total international tourist arrivals decline 6% from 2008 (worldwide international tourist arrivals dropped from 922 million in 2008 to 880 million in 2009 or about 4%, due mainly to the global recession and AH1N1 outbreak).
According to Wikipedia compilation of tourism data for 2009, the most visited city in the world was Paris with 15 million international visitors during the year, followed closely by London with 14 million (Kuala Lumpur ranked fifth with nine million visitors).
In terms of a country’s international tourist arrivals, the United Nations World Tourism Organisation ranked France top of the list with 74 million international arrivals in 2009, followed by the United States (55 million). The United Kingdom is sixth (28 million) while Malaysia is ninth (24 million).
One personal observation is the prominence of Chinese tourists in London department stores such as Selfridges and at Galleries Lafayette (Paris’s most popular department store and apparently, the second most visited tourist attraction after the Louvre Museum).
I noticed that more than half of the shoppers inside Louis Vuitton boutique in Galleries Lafayette Paris are from China, quite a few of them armed with shopping lists and bags full of Louis Vuitton bags.
I was told that in Europe, most branded luxury boutiques have Chinese, Japanese and Korean speaking staff, some with special customer services desk dedicated to Asia customers.
Perhaps we in Asia can also focus more on increasingly wealthier Asian consumers, not only Chinese and Japanese but also Koreans, Indians, Indonesians and so forth.
Johan Svanstrom of Expedia unit Hotel.com in Asia estimates 50 million outbound travellers from China in 2010 (compared with just 10 million from Japan) and he expects 100 million outbound Chinese within the next decade. Add into the calculation increasingly wealthier Indians and Indonesians travelling, there is even higher growth in Asia tourism.
Thailand, Singapore and Malaysia have done well over the years in attracting international tourists. Even so, a lot more can be done. We must be prepared to attract more tourists and compete purposefully to provide higher value goods and services.
The tourism industry has such huge potential and lucrative rewards for many nations that we in Asia, at the centre of the action, should devote more of our time, energy and resources, to focus on attracting high-value tourists instead of bickering over pride and prejudices.
The Internet has made the dissemination of service information fast. One can also easily market one’s services to the world cost efficiently. It has levelled some of the playing field, but one must have the mindset to compete and to serve the world market.
Attracting foreign direct investment is important to our nation’s industries. In the services sector, what’s equally important are policies to attract tourists and other high-value services such as the number of foreign students in our private colleges and universities, the number of foreign funds managed by Malaysia-based fund managers or the numbers of foreigners buying Malaysian homes and so forth.
These are some of the services that are likely to increase contributions to economic growth in the years ahead.
● The writer is the founder and chief investment officer of Singular Asset Management Sdn Bhd.
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