Transcript
Speaker: Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
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Speaker: And now onto today's show.
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Speaker: Hello and welcome to Under the Banyan Tree from HSBC Global Research.
Speaker: I'm Fred Newman, Chief Asia Economist, joined as ever by my opposite number from the world of equities and perennial optimist, Head of Asia Equity Strategy, Harold van der Linde.
Speaker: Hello, Fred, and hello, listeners.
Speaker: We've got a fun and hopefully informative show coming up for you today.
Speaker: It's our quarterly list of surprising stats from the world of markets and economics here in Asia.
Speaker: From the global headquarters of Under the Banyan Tree here in Hong Kong,
Speaker: This is the podcast where we put Asian markets and economics in context.
Speaker: So, Harold, first that I absolutely love that.
Speaker: I'm an addicted coffee drinker.
Speaker: Oh, me too.
Speaker: So that just jumped right at me.
Speaker: And that is there is a Chinese coffee store chain that's called Lukan Coffee or Luckin Coffee, depending on how you want to pronounce that.
Speaker: Now, that has seen explosive growth in China.
Speaker: And you're saying it's opened more stores in the last 12 months than there are Starbucks in China currently in total.
Speaker: So this is in one year that company has grown more than Starbucks has over the last 20 years in China.
Speaker: That's right.
Speaker: Because Starbucks, if I'm not mistaken, run coffee shops for it.
Speaker: 20 odd years, almost 25 years now.
Speaker: This company has just doubled, I mean, built up the same number of stores as Starbucks in the last year.
Speaker: The craze seems to be coconut latte.
Speaker: I haven't had one yet.
Speaker: Have you tried one?
Speaker: I have not had coconut latte and I didn't need any coconut in my latte.
Speaker: But they seem to have stumbled across a trick here.
Speaker: And that is that they are introducing interesting flavors.
Speaker: Absolutely.
Speaker: I think they're using sometime Chinese alcoholic drinks and all these sort of things.
Speaker: Maybe the alcohol is not there, but those flavors go into it.
Speaker: So they are quite creative with some of the products.
Speaker: So here we are.
Speaker: There's a nation of famously a nation of tea drinkers that has gotten onto the coffee craze, but with a twist.
Speaker: And that is with a squeeze of coconut.
Speaker: Yeah, maybe it's a squeeze or maybe it's a big plump of it.
Speaker: I don't know.
Speaker: And also, who knows whether, you know, coconut lattes are still popular in a couple of years from now.
Speaker: It could also be a fad.
Speaker: And then, of course, the company would have to reinvent with new drinks.
Speaker: But they don't seem to have trouble doing that.
Speaker: I actually call with a suggestion here for a new product, a durian latte.
Speaker: I love durian.
Speaker: Apparently, there's a durian craze as well.
Speaker: Make a durian latte.
Speaker: Durian, of course, being that very, very, some would say smelly, other people would say more fragrant fruit from Southeast Asia.
Speaker: All I would request is that next time we record this podcast and you have a durian latte, you record it in a separate room.
Speaker: That's right.
Speaker: That's probably a good idea.
Speaker: Now, on to our next stat.
Speaker: And that is an interesting one.
Speaker: We're going to go to India, actually, and the big country.
Speaker: And you're right here.
Speaker: And that caught my eye.
Speaker: And that is that 15 percent of pilots in India are actually female, which is not a high number, all considered, but it's three times the world average.
Speaker: Exactly.
Speaker: Now, that sounds really good.
Speaker: And you can think, hey, aviation is booming in India and Indians are traveling around the region, not only in India, it's booming, but around the region as well.
Speaker: So, yeah, you need more pilots and you've got female pilots.
Speaker: And as you said, three times the global average.
Speaker: But it's unusual to see this in India, right?
Speaker: Because, well, maybe you know this very well, Fred.
Speaker: Well, the female participation rate in the workforce is actually extraordinarily low, at least in the formal sector.
Speaker: Of course, Indian women work.
Speaker: The informal sector.
Speaker: If you just look at the formal sector, they have a very low participation rate.
Speaker: In some ways, it's unusual to see then what is generally a male-dominated profession, India actually having a higher rate of female pilots than other countries.
Speaker: But it's interesting, you know, if you take a step back and look at Asia, there are countries where actually the female participation rate has changed dramatically and Japan stands out.
Speaker: Japan stands out, right.
Speaker: Where the last 10 years, 15 years, has gone from 40% to nearly 80%.
Speaker: Yeah.
Speaker: And that has mobilized a lot of workers, right?
Speaker: And that has held up growth in Japan.
Speaker: And so these are variables that do change over time.
Speaker: That's right.
Speaker: So you can see that Asia's mold is breaking, right?
Speaker: So for a long time in Japan, the number of women formerly employed was extremely low.
Speaker: But then the need is there.
Speaker: The population is shrinking.
Speaker: You still need people.
Speaker: And you can see, therefore, that...
Speaker: Well, Chairman Mao famously said women hold up half the sky, although in my household, my wife would probably argue she holds up 70 percent of the sky.
Speaker: And that's probably still an understatement for that.
Speaker: But you're right.
Speaker: In China, it's the opposite.
Speaker: China is the one country where female participation rates are really high.
Speaker: Women tend to work in China much more often than in many other countries in Asia.
Speaker: Yeah, and that's why China has had a much bigger mobilization of the labor force.
Speaker: And that obviously benefited its growth since the reopening of the Chinese economy in the early 1980s.
Speaker: You didn't just have men who were looking for jobs and working.
Speaker: The female population was as well in the former sector.
Speaker: And that kind of drove growth, the availability of workers.
Speaker: Yeah.
Speaker: And this is maybe, therefore, if we see that the mold changes in Japan and in China, it has worked, then maybe this is a first statistic whereby we see that, yeah, women can be employed more often in India.
Speaker: And that would be an additional growth driver for that country if that were to happen.
Speaker: And in India, it all started with the pilots.
Speaker: It all started with the pilots.
Speaker: Now, another statistic here, and that is chips are, of course, everything.
Speaker: Mainland China is a huge importer of chips, semiconductors.
Speaker: We're not talking about the potatoes, talking about semiconductors.
Speaker: Yeah, we're talking about semiconductors, the computer chips.
Speaker: And they import more than they do oil.
Speaker: They're huge import of oil, world's largest import of oil, but you're saying they actually import more semiconductors even than they do oil.
Speaker: Now there's two stories to this, I guess.
Speaker: First of all, they import a lot of semiconductors.
Speaker: And that shows you that in the very high-end tech, they are still reliant on getting these products from outside of China.
Speaker: They've, of course, been trying to build up their own semiconductor industry
Speaker: over the last 25 years.
Speaker: And that has worked to a certain extent, but not to the extent that they are self-sufficient yet.
Speaker: And I presume that is a sort of thing that I would like to change over the next couple of years.
Speaker: On the other hand, it also tells you that they don't import maybe as much oil.
Speaker: I mean, China has gone full out on hydro, nuclear, wind, solar.
Speaker: We have solar.
Speaker: plenty of supply in most of these industries, and electric vehicles.
Speaker: So your actual fuel bill as a country, given that you actually can source some of the energy domestically and you can use that in your cars, yeah, is therefore lower than it would be in many other countries, right?
Speaker: Yeah.
Speaker: Yeah, but there are a couple of interesting trends, I think, here as well.
Speaker: One is that China is obviously massively investing in semiconductor capacity more at the lower end.
Speaker: And there's so much investment coming through that probably China will also become a huge exporter of semiconductors in years to come, maybe more of the lower end.
Speaker: But there's so much capacity coming on stream that, yes, it's a big importer, but it also will be a big exporter as well in years to come.
Speaker: Mm-hmm.
Speaker: Well, this is probably a good point to take a quick break.
Speaker: And when we come back, we want to look at Koreans and where they stuff their money, not under the mattress, but in certain markets.
Speaker: And we'll take a closer look at that.
Speaker: Excellent.
Speaker: Welcome back, everybody.
Speaker: I'm here joined by our flying Dutchman, the inimitable Harold van der Linde, who's again put out his very fascinating statistics.
Speaker: And we already discussed before the break a little bit about Indian female pilots.
Speaker: Yeah, yeah.
Speaker: coconut flavored latte in China.
Speaker: But one year caught my eye, and that is Koreans.
Speaker: Koreans, obviously, very high-saving society, lots of savings.
Speaker: And they're increasingly investing overseas, of course, buying foreign assets.
Speaker: And you're saying here that their weight of global equities in their portfolios has actually grown forever.
Speaker: five times since 2019.
Speaker: So there is a veritable equity investment surge by Korean households buying global equities.
Speaker: Absolutely.
Speaker: They have increased their exposure to global equities, mostly U.S., I suspect this is, five times since 2019.
Speaker: Now, we know that the Koreans during COVID years, they were very actively trending in their own market.
Speaker: But after COVID, that really got stuck and reduced.
Speaker: And therefore, they must have gone to...
Speaker: by US or European, global equities at least.
Speaker: So that's one trend we see.
Speaker: What we also see in some markets, Korea, but in Taiwan, for example, this is a big trend as well.
Speaker: People don't buy stocks, they buy ETFs.
Speaker: So they just buy some large ETF here and there and that's their exposure.
Speaker: How do you explain why is a
Speaker: Koreans especially eager to buy global equities?
Speaker: Why are not Indians or Vietnamese or Singaporeans?
Speaker: First of all, you have sometimes capital controls to a certain extent.
Speaker: China has got strong capital controls.
Speaker: But actually in India, for example, there's a limit on how much money you can bring out as a retail investor out of India.
Speaker: So there are to a certain extent some controls onto that.
Speaker: Secondly, we see that there tends to be a trend whereby first if people start to buy equities, and we see this for example in Indonesia now, in Thailand, they first start with their own local market.
Speaker: Those are the companies they're most acquainted to.
Speaker: They see them every day.
Speaker: So it seems that that's where the comfort is.
Speaker: And then they go regional or global.
Speaker: And probably what helped is that the U.S. market has simply performed extremely well.
Speaker: Yeah, and they've sucked in more money.
Speaker: And, of course, Korea is a very tech-savvy society.
Speaker: U.S. tech names have done very well.
Speaker: You know, they're probably...
Speaker: There is an affinity there, if you will, as well.
Speaker: One point I would add here, it's interesting, you're talking about Korean households buying global equities.
Speaker: That's a capital outflow out of Korea.
Speaker: And that means there's demand for dollars in Korea and the currency there for weekends.
Speaker: And what we've seen actually in recent weeks is that the National Pension Fund
Speaker: is actually reversing this, is buying Korean assets, selling foreign assets to offset some of that drain on the currency.
Speaker: So it's interesting, yes, Korean households are moving abroad, but the pension system is slightly tilting back at the moment to kind of offset that.
Speaker: So there's interesting counterflow.
Speaker: That's interesting because for a household, of course, they have money in the pension fund as well.
Speaker: So net net, their full exposure to global equities might definitely not be as high as they think it is.
Speaker: Yes.
Speaker: That's right.
Speaker: Yeah, yeah.
Speaker: So this is, of course, a disclaimer with Herald statistics.
Speaker: You always need to have an economist who cross-checks them.
Speaker: These things.
Speaker: Make sure that the next thing is right.
Speaker: Look, another fascinating statistic.
Speaker: And really, you have a knack for finding those interesting twists in data.
Speaker: And this is going back to China, the land of superlatives and values.
Speaker: And coconut lattes.
Speaker: And coconut lattes as well.
Speaker: Now, EV batteries.
Speaker: There's a maker of EV batteries called CATL.
Speaker: Correct.
Speaker: And that is probably the largest global auto battery maker for electric vehicles.
Speaker: And that CATL can produce one battery cell every second.
Speaker: And one battery pack every two and a half minutes.
Speaker: So imagine the number of batteries that this particular company makes, either packs or whatever, that continues to roll up.
Speaker: And this is 24 hours.
Speaker: This is 24-7, I would imagine.
Speaker: This is not just during 10 to 4 on the Monday afternoons.
Speaker: This is around the clock.
Speaker: Exactly.
Speaker: And these batteries, of course, to a large extent, go into electric vehicles.
Speaker: And in China, 50% of the cars now being sold are electric vehicles.
Speaker: That's growing rapidly.
Speaker: In a couple of years' time, there will hardly be any combustible engine car being sold anymore in China.
Speaker: So, yeah, that goes into the car industry.
Speaker: And, of course, that's also being exported around the world.
Speaker: It's Chinese companies that export their EVs and, to a certain extent, foreign companies that buy these batteries as well because they do not have the capabilities.
Speaker: And we should probably also say that scale, obviously, initiative massive scale operations, confers competitiveness in this business.
Speaker: So it's partly about the technology you have, but also the amount of batteries you can build, which then reduces the unit price.
Speaker: Unit cost, and therefore you are the most cost competitive producer on the planet in certain batteries.
Speaker: That makes it easier to export or go to European or US companies and say, listen, why don't we just make the battery for you?
Speaker: We can do this much cheaper for you and it allows you to reduce your car price again.
Speaker: Now, total capacity for electric vehicle in China overall, not just for CATL, but if you take all companies, is actually enough to satisfy global demand for any country.
Speaker: That's how massive the capacity is.
Speaker: Which is very, very impressive.
Speaker: But is there a risk that we might find that there's new technologies coming through in the next few years, breakthrough technologies, different types of batteries are much, much better that would upend that?
Speaker: Or do you think this is such a dominant technology now?
Speaker: Well, I think they seem to be in the cutting edge.
Speaker: So I've been told, for example, that some of the batteries they make in the past couldn't go into...
Speaker: very low temperatures.
Speaker: So if it was extremely cold, these batteries would freeze, but they've now been able to adjust these batteries.
Speaker: So even if it's minus 30, they can still run.
Speaker: It's the same in tropical countries.
Speaker: If they overheat, they can still deal with it.
Speaker: So it seems on the cutting edge of it.
Speaker: Also, some of these batteries allow an EV now to run for something like 800 kilometers or close to a thousand kilometers.
Speaker: So I think on the battery front, they seem to be cutting edge.
Speaker: The risk is, of course, that another technology emerges.
Speaker: Think about hydrocars or maybe something that we don't even know yet, something that emerges over the next 5, 10, 15 years, just like the combustible engine companies struggle to then move into EVs.
Speaker: It might well be that the EVs at some point in time struggle to move in whatever the next technology is going to be.
Speaker: Yeah, there's always risk.
Speaker: Or another possibility might be solar panels.
Speaker: Maybe they become so good that you don't need a battery.
Speaker: You just, even at night, there's enough light around for these to drive.
Speaker: But then you probably still need to store it.
Speaker: So you need some sort of battery, I guess.
Speaker: But yeah, but you have to be open.
Speaker: And that depends very often, not just on the company, but also the management of these companies.
Speaker: There's a new technology.
Speaker: Are they open up to quickly move into that, right?
Speaker: Yeah.
Speaker: But the Chinese economy, as we discussed, is highly innovative.
Speaker: And, you know, with its batteries or coconut lattes, you know, there's always new stuff coming out of China.
Speaker: And so I'm sure you'll be on top of these statistics and we'll check back in with you next time you have your favorite stats out.
Speaker: You've got plenty more here.
Speaker: We only scratched the surface.
Speaker: So thanks again, Harold.
Speaker: And we'll pick this up again in the future.
Speaker: Good idea.
Speaker: Well, that's about all we've got time for on this episode of Under the Banyan Tree.
Speaker: There are plenty more quirky facts and stats on Asian markets and economics in our latest edition of my signature report, The Flying Dutchman.
Speaker: Do check those out on the Global Research mobile app or the website.
Speaker: Indeed, and we'll be back next week with a podcast recorded live in front of a studio audience in Singapore with special guests Pranjo Bhandari, Joey Wang, and Joey Chu from our Asia research team over there.
Speaker: Make sure you join us for that, and we'll talk to you then.
Speaker: Thank you for joining us at HSBC Global Viewpoint.
Speaker: We hope you enjoyed the discussion.
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