Trade within emerging markets, Asia doubling - Citi

MANILA, Philippines - Trade within the emerging markets has doubled while the share of the advanced economies in global trade has dropped, according to a leading official of Citibank (Citi).

Citi Asia Pacific chief executive officer Stephen Bird also said that by 2020, Asia would overtake North America to become the world’s biggest consumer bloc.

“Trade within the emerging markets – transactions that never cross an euro zone or G7 border – has risen sharply, from six percent of total world trade to 15 percent between 1995 and 2011,” Bird told FinanceAsia last week.

He added that emerging market trade with advanced economies is still bigger than intra-EM trade but the gap is closing. The advanced economies’ share of global trade is now 65 percent, down from 79 percent in 1995.

Citi has concluded that China and India will be the world’s largest economies by around 2030, the role the two nations had in the world two centuries ago.

The Citi regional chief executive outlined that Brazil, South Korea and China are three nations that prove his point.

 Brazil’s trade with Asia represented just six percent of its total in 1995. In 2011 it was 20 percent, or a tripling in less than 15 years.

In 1995, South Korea’s trade with China was nine percent of that country’s total. By 2011 it had more than doubled to 20 percent.

The growing emerging market consumer base has the power to drive global gross domestic product (GDP).

Every year, millions of people rise above poverty and enter the middle class or some 70 million in 2011 alone. According to another estimate, by 2020, three-quarters of incremental consumer spending will come from emerging markets.

Citi embraced that level of realization, thus it was one of the global players that redeployed early in the day.

“We have also expanded our network in the last decade in Asia from 100 to 700 branches and completed major acquisitions or investments across the region – so we have built up a business that has scale,” Bird said.

In the first three months, revenues were up nine percent, and net income was up 18 percent year on year, with Asia accounting for close to 40 percent of global net.

“Asia’s mega trends of a fast growing emerging affluent sector, who want innovative retail banking services that embrace modern technology, and the rise of corporate champions, who want to raise capital and seek advice on acquisitions plays to our strengths,” the chief executive told FinanceAsia.

He added: “This is important as it shows the billions of dollars we have invested into this region over the last decade to support our clients are generating results. These investments are why we have a well balanced business – split roughly 50/50 retail and institutional with a portfolio of 17 markets with no one country generating more than 10 percent of revenues.”

Meanwhile, a report by Capgemini and Royal Bank of Canada show that the Asia-Pacific region was home to 3.37 million high net-worth individuals, with a combined value of $10.7 trillion.

In North American, there were 3.35 million in that category with a combined value of $11.4 trillion.

In the same report, Europe accounted for 3.17 millionaires with a combined worth of $10.1 trillion.