Expect delays

baby_briefcase_410A snowy end to a strange year. Anyone who thought the global financial crisis was over in Europe had to think again when Greece had to be bailed out. And again when it was Ireland's turn.

What will the New Year hold? More questions over the euro’s future seem inevitable. And there will almost certainly be social unrest, as trades unions around Europe prepare to fight back against austerity measures and other outrages. Rome saw its worst street violence for years last week as Berlusconi edged victory in a no-confidence vote. Here in the UK, with student demos aplenty, it’s already starting to feel a bit like the Thatcher years.

Now the boss of the UK’s largest trades union, Unite, has called for a sustained campaign resistance to government cuts next year. Expect disruption – and not just in the transport infrastructure.

Meanwhile markets have held up pretty well, particularly emerging markets. And a domestic consumption boom in the likes of China is expected to fuel further growth in the coming years.

Newton Investment Management, for one, expects rising incomes, changing demographics, a high savings rate, and the “changing psychology of Asian consumers” to ignite a consumption boom in Asia that will be more robust than the consensus outlook.

“There are 500 million individuals rapidly moving up the income curve with aspirations to spend more on products and services ranging from low-end staples, such as diapers, to luxury goods such as designer clothes and luxury cars,” says Jason Pidcock, investment leader of Asian equities at Newton.

Newton also argues that a lower percentage of the population in the very young age brackets than in the 1980s, combined with Chinese government programmes for healthcare and social housing, will decrease the need for a high savings rate, freeing up more money for discretionary purchases – that means more nappies and designer clothes.

“Having already seen the impact of China’s productive power over the last decade, we believe the world now will begin to feel the force of its consumptive power, especially as the vast population in the rest of the region follows China’s lead up the income and consumption curves,” he says.

In other words, China is going in exactly the opposite direction to its debt-riddled, developed-world counterparts. And it doesn’t yet worry about bankers who wouldn’t have made a profit if they hadn’t been bailed out by tax payers getting big bonuses and annoying people.

Then again, it does have a locked-up Nobel Peace Prize winner. No amount of blustering can make that look good.

Here at Funds Europe we wish you a very Merry Christmas and a Happy, Good New Year – whatever it may bring.

Fiona Rintoul, editorial director

©2010 funds europe