Jonathan Pain Investing in the New Reality-Are You Ready?

A Journey from West to East, via the Middle East A complex and volatile world Identify the key themes Volatility brings opportunity

Submerging versus emerging Submerging nations will spend less and save more Emerging nations will spend more and save less Yes, it is as simple as that

The New Reality of Frugality Source: Ned Davis

Shop until you drop! Source: Bloomberg Total U.S household debt

The great new divide Submerging Iceland…go fishing Ireland Greece Portugal Spain USA U.K Japan...Et tu Italy Emerging China India Brazil Indonesia Vietnam Singapore...a role model?

Super Mario Does it Again LTRO- A game changer 489 billion plus billion= A lot! Fiscal and credit contraction= recession Euro to survive

The winds of change Autocratic and repressive regimes Duplicity, democracy and stability Israel and Iran All eyes on the Straits of Hormuz TurmOIL in the Middle East

It’s up to you New York, New York Over 3 billion consumers in Asia China new frontier-its own backyard High speed rail Mobile phone sales in India (20 million a month) six million in 2002, eight hundred million in 2011 Chongqing

When China sneezes the world catches a cold! China GDP 56%,India 43% (IMF) High income countries just 2% “ The BRIC’s will add $12 trillion over next decade – double eurozone and U.S” (Goldman Sachs)

Rise of Asian middle classes 570 million > $3,000 disposable income a year 945 million in 5 years Discretionary spending $ 2.9 trillion to $ 5.0 trillion Most significant economic phenomenon of our lifetime Source: CLSA

A maturing giant 10% average annual growth since 1978 Second largest economy slows Composition and quality of growth to change 7% growth in 2012

The Lucky Country 75% of our exports go to Asia Political headwinds Some relief from the RBA

Vietnam-A Phoenix Rises Doi Moi 1986 A young and literate nation Serves to illuminate the remarkable potential Is it not of imperial arrogance to assume...?

The adjustment we had to have Do you remember The Mother of All Crossroads? “ As we look to the West we see an economic giant that is in the first phase of a painful decline. As we look to the East we see a phenomenon that will shape and define our lives for decades to come.” 2008 was a defining moment in time which accelerated the inevitable.

Investing in The New Reality The rise of Asia is the defining and determining factor in portfolio construction Companies with exposure to Asian middle classes MV=PT and the mother of all monetary experiments MSCI-Mainly Submerging Country Index!

The New Reality World divided between submerging and emerging In an age of globalisation... In a digital age of technology,transparency and connectivity A fusion of East and West Welcome to The New Reality

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