Business as Unusual

It’s business as unusual here in Asia; unusual compared to business in the West, that is.

For every spender in the West, there are ten savers in the East. For every Wal-Mart shopper and Snuggie-clad sofa surfer in the US, there exists a team of manufacturers in Viet Nam…and Cambodia…and right here in Taiwan, toiling away to improve their workaday lot. And as the West goes borrowing, the East goes lending…for now, anyway. It’s the yin and the yang, if you will.

Markets in this region are, for the most part, continuing along the same trajectory from where they left off at the end of last year: Higher. Japan’s Nikkei 225, which represents one half of Bill Bonner’s Trade of the New Decade – is up… Hong Kong’s Hang Seng is up… Korea’s Kospi, China’s CSI 300, the Aussie All Ords… Up, up, up!

Of course, it’s not really a New Year here yet. Not technically. Chinese New Year celebrations take place according to the lunar calendar. This year they fall in mid-February, right when Westerners are exchanging Valentine’s Day cards. This quaint cultural oddity provides more than simply a loophole opportunity to renege on your New Year’s Eve resolutions twice in the same “year.” It is also serves as a reminder of the “Westernization” of the East and of the gradual but persistent changing of the tides, the steady flow of money and power from the developed, to the developing, from the already-emerged, to the emerging.

Foreign investor capital is flooding back into this region as risk appetite grows again in the West. As we noted in a recent DR Weekend Edition:

“In the three quarters leading up to March of 2009, widespread economic meltdowns in the West saw some $262 billion vacuumed out of Asia’s red hot ‘tiger’ economies as beleaguered funds in The City, Wall Street and elsewhere repatriated capital to meet crushing margin calls closer to home. However, over the past six months, almost all of that cash ($241 billion) has found its way back to Asian shores.”

Nothing goes up indefinitely, of course. Just ask your local real estate broker if you don’t believe us. And nothing goes up, or down, in a straight line either. The free-and-easy monetary policies around the world facilitating this surge in liquidity will end eventually. Then it will be a matter of who has the biggest savings accounts…and the biggest resource reserves…and the biggest gunships and stealthiest stealth bombers.

But for now, at least, the trend is clear. Where once the world looked to the American consumer to buoy the delusional “spend-your-way-to-riches” economic model, they now look to consumers in China and emerging markets to pick up the slack. Can they spend like Americans? And, perhaps more importantly, do they even want to? It is probably still too early to tell. We’re yet to see anyone in Asia lazy enough to dress in a blanket with arms…but we’ll let you know as soon as we do.