Bust2Boom: Are you ready for the recovery?

7th May 2009(A MDeC & TeAM joint Forum)

PanelistsMr. Chris Chan, CEO, The Media Shoppe Bhd (TMS)Mr. Michael Lai, CEO, Packet One Networks (M) Sdn BhdMr. Low Huoi Seong, CEO, Vision New Media Sdn BhdMr. Zubir Ansori Yahaya, CEO, Malaysia Debt Ventures BhdMr. Saifol Bahri Shamlan, VP, Multimedia Development Corp (MDeC)

ModeratorDr. V. Sivapalan

Some economic and business statistics

By Dr. V. SivapalanModerator

Creative commons. Please feel free to use these slides but a short reference as follows will be appreciated: “Compiled by Dr. V. Sivapalan of Ventura

Partners Sdn Bhd, Malaysia” © 2009 Dr.V.Sivapalan

• Are world economies on the mend?• Will we see a recovery soon or will this be a long drawn recession or prolonged slowdown?• What statistical evidence is there that to support the thesis that a recovery is around the corner?• The following slides provide some evidence. • However, you have to draw your own conclusions. • My comments are in red font.

Dr.V.Sivapalan

USA - Confidence in the economy is growing

Siva: Confidence is the key to the return of normalcy.

The graphs show that consumer confidence is growing in the USA. More people think the economy is getting better.

Consumers are starting to spend on homes, general shopping & gifts.

Business Confidence is returning

US Unemployment Rate still going up

Unemployment has currently hit 8.9% (as at 8th May 2009). But the rate of layoffs is slowing.

Non-farm payroll is the normal indicator used to measure job losses. As can be seen, the current recession is not the worst, far from it. It may get worse, but it will probably not be as bad as 1948, 1957 or maybe even 1981.

US job losses in ten post-war recessions & time to recovery

Most recoveries have been almost ‘V’ shaped, except for 1990 & 2001. Will this mean the current recovery will be strong & fast? Time will tell.

Latest US Jobs Report

Latest News from CNNMoney.com as at 6th May 2009

1) Private-sector employment decreased by 491,000 in April, a 31% improvement from the revised 708,000 drop in March.

2) Economists surveyed by Briefing.com had expected a loss of 643,000 jobs last month.

3) Job cut announcements by U.S. employers totalled 132,590 in April, an improvement of 12% from March's 150,411 cuts. It was the lowest total since last October.

4) The unemployment rate is predicted to rise to 8.9% from 8.5%

US Durable Goods & Home Sales

Orders for durable goods & home sales are finally turning around. That is always a good sign of consumer confidence that will lead to industrial & economic recovery.

China Manufacturing New Orders & Export Orders

China has been the recovery story of the year. As probably the second leading economy in the world after USA, a strong recovery in China will help the rest of the world & even the USA. It certainly helps commodity dependent economies like Australia & Africa.

China Total Loans Growth

Loans have been growing strongly, perhaps too strongly. Chinese authorities have started to moderate loans growth fearing a bubble may be forming. This is good for the economy.

China – Shipping Rates Baltic Dry Index vs Export Orders

As Chinese exports rise, shipping rates are also rising, another indicator of a turnaround in the world economy. We still need to see a more prolonged rise to be certain.

Are commodity markets bottoming?

China’s manufacturing is growing strongly & commodities are rising off their bottom. US manufacturing is showing positive signs but EU is still slow. So what else is new?

The GSCI Spot Index tracks the price levels of principal physical commodities that are available in active, liquid futures markets. The commodities selected for this hypothetical portfolio are intended to be broadly representative of the entire spectrum of commodities available for investment.

GDP Growth Rates

The IMF is predicting positive growth in 2010.

GDP Growth Rates – Alternative Scenarios

Based on PwC’s alternative scenarios, unless there is a prolonged recession we will see positive GDP growth worldwide in 2010.

GDP Growth Rates – Asian Region

Source: Asian Dev Bank

Self-explanatory. All economies in East and South Asia expected to see positive GDP in 2010, including Singapore one of the worst affected economies in 2009.

Stock Markets

Is the stock market bull in the toilet?

Worst S&P Bear Markets last between 20 to 34 months. Its been 18 months already for the current bear market. Is that why markets are rallying? Does it

know something we don’t?

Market Indices – BRIC(Brazil, Russia, India & China) vs S&P

The BRIC countries’ stock markets are showing signs of bottoming. As as 7th May, most are having mini bull runs.

Bursa Malaysia Rally from 840 to 1023 (21.7%)

Bursa Malaysia, the Malaysian Exchange is having a nice bull run as well with a 21% gain over 45 days.

Conclusion

The Panel Discussion that followed concluded that we will definitely see a recovery in 2010 if not late 2009.

So companies should start preparing for the recovery.

ConclusionSome concrete measures were recommended by the Panelists:

• Get yourself benchmarked. A slowdown is a good time to get yourself benchmarked and to prove to customers that you have high standards in place. For example software companies can get themselves benchmarked to CMMI standards.

• Do more R&D. When business is good, you will be busy serving clients but a slowdown is a good time to analyze your business and improve what you have to offer by spending the time on R&D.

• Take advantage of the many grants on offer, not just R&D grants but also marketing grants. They can help you build up the business for the coming recovery

Conclusion• Build more partnerships, locally, regionally and globally. When times are slow everyone will be more willing to look at new partnerships so this is a good time to do this.

• Build credibility and a good track record, both for the business and personally.

• Spend time exploring the needs of your customers and fulfilling those needs.

• Broadband and convergence is a powerful medium that will disrupt the way business is done globally. It is no longer only about the Internet but convergence will happen with other devices and the most powerful of these will be mobile. Study how this will affect your business and your customers and use it to build new disruptive businesses.

Contact

Dr.V.SivapalanEmail: siva@venturapartners.com.my

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