Conference Presentation, Panel
Asia Summit 2015 - Global Capital Markets: Taking Stock of Recent Developments
- Multiple future Milken Institute events are scheduled, including an Asia Summit next year, a Global Health Summit in Washington on March 1st, a London event on October 12th–13th, an Annual California Summit in December, a Partnering for Cures event in New York in November, and a global conference in Los Angeles on May 1st–4th.
- David Bonderman predicts the current Asian market situation is not catastrophic like the late 1990s crisis, expects the Chinese stock market to outperform Western markets after the current decline, and anticipates the Renminbi will strengthen over time as the economy recovers, alongside government actions to halt capital outflows.
- Josh Harris forecasts global economic growth of 2.5% to 3%, predicts China's growth rate will structurally decline from 7% to 6%, and warns that a hard landing in China could reduce global growth by 100 basis points; he expects a zero-rate environment to persist for a long period with no aggressive Federal Reserve rate moves.
- Michael Kim anticipates China's domestic consumption will grow at 10% while the overall economy operates at 6% to 7%, noting that a 5% growth rate could be optimistic for a $10 trillion economy, and predicts a shift toward a consumer-driven, health-focused society.
- Regarding monetary policy, the speakers expect the European Central Bank and Bank of Japan to continue quantitative easing, with the Bank of Japan potentially forced to devalue the yen further; Harris warns that a U.S. rate hike while others cut rates could trigger currency wars and RMB devaluation.
- Kim expects investors to seek stability and hedge currency exposure outside the U.S. dollar for the next one to four years, while corporations maintain record liquidity, with Apple holding over $200 billion in cash.
- Demographic and structural shifts include Kim's prediction that Asia is becoming the fastest-growing ethnic group in the U.S. at over 20%, that Asian nations spend 15% of middle-class income on education, and that the U.S. economy accounts for 20% to 25% of global output.
- Investment opportunities are expected in electric cars, bioscience, and health and wellness industries in China, with Harris noting that aggressive lenders like Apollo and TPG will fill gaps left by banks exiting the Asian capital markets.
- Harris anticipates that finding alpha will be difficult due to quantitative easing, requiring creative strategies, while Kim predicts volatility will increase and that Chinese wealth diversification will drive real estate demand in markets like Miami.
- Kim asserts that Asia will need to develop unique forms of democracy and capitalism blending central planning with egalitarianism, and notes that the culture's commitment to education and the shift from manufacturing to consumption will drive future quality-of-life investments.
- Risks identified include a self-fulfilling prophecy of downward price moves impacting spending, the potential for Asian capital markets to remain banking-dominated, and the challenges of Asianizing financial structures in a U.S.-centric global system.