WSJ: Consumers in China and Brazil Discover Debt

Number of the Week: Consumers in China, Brazil Discover Debt.Number of the Week
17.1%17.1%: The rise in Chinese credit-card balances in 2009.

While consumers throughout the developed world struggle to shed debt, their counterparts in China and Brazil are piling it on.

In 2009, the year the global recession hit bottom, the aggregate credit-card balances of Chinese consumers rose 17.1% even as those of U.S. consumers fell 8.7%, according to a study by financial consultancy Lafferty Group. Brazilians increased their balances by 28.9%, part of a 9.2% rise throughout Latin America.

More people going into debt might not sound like a desirable development, but in some ways this could be. One of the global economy’s biggest problems has been its dependence on an overstretched U.S. consumer. If folks in places such as China and Brazil are now stepping up and taking on some of the burden, that could provide some much-needed rebalancing.

To be sure, the picture is still unclear. The U.S. is running a large current-account deficit, which means Americans are still spending more than they earn, while the rest of the world — including China — saves to make up the difference.

The data from Lafferty, though, suggest at least the potential for that picture to change. As of 2009, China, Brazil, India and Russia had a total combined credit-card balance of $143 billion, still a far cry from the U.S.’s $849 billion but getting into the same league. Two Chinese banks were among the global top ten by number of cards issued.

The danger, of course, is that consumers in the developing world get themselves into the kind of credit bubble that triggered the most recent global crisis. By international debt standards, it looks like they have a way to go. China’s total credit-card balances amounted to only 2.4% of the country’s annual economic output, compared to 6.0% in the U.S. Brazil’s stood at less than 1%, and India’s was even smaller.

In other words, a little well-placed profligacy might yet do the world some good.

9/23/2010: Want Want China Holdings-Stock Meeting

9/23/2010: Want Want China Holdings-Stock Meeting

Full discussion next week, intro discussion today.

Macro, emerging market play: Bill discussed some hedge fund managers see the play as toppy, but if investors look carefully there is room to play.

Wally would hold on investing in Ag commodities/copper, agrees with Michael that the EM consumer is a priority

EM Consumer ETF:
Know your trendy investor acronyms
-CIVETS: Columbia, Indonesia, Vietnam, Egypt, Turkey, South Africa

-EPU would give us exposure to copper

Financial Times series: rise of the EM Consumer
SAB Miller in South Sudan since May 2009, White Bull Beer has spent $37M on factories.

Eggs major source of protein for India and China, competing with Brazil and Argentina for the egg market. Brazil exports to Middle East.

Consumer in developing Asia and Japan reached 4.3T in 2008, 1/3 of private consumption of the developed world. By 2030 could hit 32T, 43% of world consumption.

China
-pushing back against foreigner branding, local branding gaining traction
-Lift 61% of population is middle-class from 1991 to 2008
-IMF expects 34% of population will own cars by 2050, 367M

India:
-Rapid income growth: 33 years to I crease per capita incomes from $100/monh to $500/month; it has only taken 5 years for it to double to $1,000/month
-Penetration of consumer goods is low: 12 cars per 1000 people; 18% own refrigerators; 50% own TV's. China has 128 cars per 1000 people and 80% own TV's
-Provide almost 1/3 of the incremental working population in next two decade

Brazil
- Image conscious, health conscious: personal hygiene, dieting, exercise

Russia
- internet savvy, clicking their way to bargains: groupon.com
- utkonos.ru has 90% of muscovite's food orders

Indonesia
- middle class has doubled in the last 10 years

Vietnam
- is the most eager to spend on electronics
-tied with Indonesia for consumer confidence, behind India, according to Neilso
- large trade imbalance, mostly die to consumer electronics trade with China
- GDP is expected to be 6.5% this year