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Shayne Heffernan on the trends of 2010

Most of the regular readers would know that my trading and investment strategy is based around long term, macro economic shifts. My political/economic opinion is always first, followed by how I perceive this will impact certain markets and sectors, and then I look for opportunities with in those areas.

In what is eerily similar to Orwells 1984, the world is separating into 3 main trading blocs, Europe, the Americas and Asia. Just like 1984 we also have the endless war, the war on terror which has resulted in legislation and Government policy aimed more at the nations citizens than at the "enemy".

2010 Hot Countries
The last decade has seen China emerge as the worlds second largest economy, a manufacturing powerhouse that will be delivering 100s of millions of new consumers to the world market place over the next few years. China's growth has been and remains phenomenal, but not without change. As China's economy expands and matures as it currently is, it is will not remain a low cost production base, its success will lead to China becoming a developed market and growth will shift to the balance of Asia.

The hot spots of 2010 and beyond will be India and Thailand. India, the darling of the 90s has been left in China's shadow over the last 10 years, but in the next 10 years India will be replicating China's growth.

India has some advantages over the balance of Asia, the legal framework for doing business is familiar to the west, english is widely and well spoken. We estimate India will out perform China in the second half of the decade, Chief Economic advisor to the Finance Ministry, Kaushik Basu has said India would grow by over 7.5% this fiscal and 9% in the next fiscal year.Manufacturing output increased for the ninth straight month in December, mainly to accommodate a faster inflow of export orders.

Thailand, Five emerging export markets are buoying hopes for sustainable growth in Thailand's exports this year, amid rising western protectionism, high competition and fragile but steady economic growth in the Kingdom's traditional markets.

the Department of Export Promotion (NYSE:DEP) expects 14-per-cent growth in 2010, estimating the value of exports at US$172.27 billion (Bt5.72 trillion). This is based on a baht exchange rate of 32-33 to the US dollar.

The Commerce Ministry estimates last year's exports will end up showing a contraction of 15 per cent to a value of $151.16 billion. Officially, the country's total shipments dropped 17 per cent to a value of $137.95 billion in the first 11 months of 2009.

To achieve the export target in 2010, the DEP plans to deploy both a budget and a task force to drive exports in each destination.

Director-general Srirat Rastapana said priority would be given to strong promotion of exports in five emerging markets: Asean, India, China, the Middle East and Eastern Europe, especially Russia.

"Those five destinations are regarded as emerging markets with strong demand for various products and low non-tariff barriers. Step by step, they will play a more important role in the country's exports in the future," Srirat said.

Of the total funds available to the DEP to drive exports, 65 per cent will be spent in the five emerging destinations and new potential markets like Africa and Latin America. The rest will be spent on promotion in Thailand's traditional markets: the US, 15 EU countries and Japan. Asean nations will be the top-priority export destination in 2010, following implementation of the Asean Free Trade Agreement last Friday.

Srirat said trade integration within Asean would pave the way for Thai export growth, because there would no longer be tariff barriers. The market will have a population of 580 million close at hand.

The proportion of Thailand's exports going to its nine Asean neighbours could grow to 22 per cent this year, from 15 per cent at present.

Exports to Asean members are projected to grow 4.58 per cent to $29.28 billion this year, from an estimated contraction of 26 per cent last year.

India is a second-priority market following its significant economic growth over the past five years. The Reserve Bank of India and the "World Trade Atlas" have reported India's economy will continue to grow in 2010. India's exports are expected to grow strongly, by 18.6 per cent to $289 billion this year, while imports will grow at an even higher rate as demand climbs for world products.

Thailand's major export is tourism, No, it is not, today, among Thailand's top manufactured export products are : textiles and garments, gems and jewellery, leather goods and footwear, computer and components, intergrated circuits, plastic products, toys, electronics and electrical appliances, and automobiles. The position of Thailand's export products in the world market is now ;

The world's largest exporter of canned pineapple and canned tuna,
The world's number one exporter of rice, rubber, chilled fish and prawns,
The world's largest exporter of precious stones,
The world's second largest exporter of sugar and tapioca products,
The world's third largest exporter of hard disks and integrated circuits.
The world's fourth largest exporter of frozen chicken, maize and cut flowers.
In fact, Thailand's remarkable achievements in her export performance are due to its competitiveness in terms of price and quality, backed up by a skilled, flexible and efficient labour force.

Ebeling Heffernan has strong exposure to both markets, India through Neah Power NPWZ that has already signed commercial and infrastructure deals in India.

In Thailand we are invested in a multitude of  sectors with a focus on manufacturing.

2010 Hot Sectors

Green Industry, once the domain of hippies and idealists will become mainstream, invaded by bankers, brokers financiers and investors. Green Energy is the hottest sector, in fact I think Green Energy is the next big thing. Whether it is Solar Power, Electric Cars or Fuel Cells, green energy will dominate infrastructure and consumer spending over the next decade, why, because it is cheap. I would like to say people care about the environment and the change is for the social good, but I can not. Green Energy will dominate the next decade based on price competitiveness, and it will win out over alternate forms of energy.

Green Energy companies that are integrated, versatile and global will become the corporate giants of the future, consumption of energy will not be reduced, it will simply be replaced. The worlds energy market is one of, if not the biggest revenue earner in the corporate world.

The race now on to gain access to markets and develop momentum and branding of Green Energy technology around the globe. This is a multi billion dollar race that will cross over into many industries, but first will be transport and grid power.

Ebeling Heffernan are very excited about our investments in NPWZ Neah Power and their Fuel Cell Technology breakthroughs, Asian Energy and its Solar Production and Government Electricity supply contracts and Ronn Motors RNNM with their fuel saving H2GO equipment.

Crunch Time for Globalization
Protectionism vs Globalization will be a hot political issue in 2010, Nafta, Afta and Europe will all face challenges as Globalization displaces workforces and redefines the economic landscape. Wealthy nations will lose non skilled labor work to developing nations at a higher rate in the coming years.

Work forces and Unions will call for protectionists policies and sadly some of the weak willed politicians will support them.

There will be a Rally
Politics aside, the massive injection of funds by Governments around the world must result in a rally, not even politicians, as ignorant as they are to the basic theories of economics can mess this one up. It is a fact, that a massive injection of funds into and economy will increase the economic activity of that economy for a period of time.

It will also create inflation and may lead to higher taxes in the future, but firstly it will create a rally. In the case of the USA with Trillions of dollars expended that rally will be a big one, 13000 plus on the Dow is my prediction for 2010. This takes into account the growing number of foreign listed companies, the large amount of revenue from US companies that comes from International markets, Inflation and increased consumption.


Playing the Pinksheets

This year we will show you why there is more money in taking companies off the Pinksheets than there is in putting them there.

Shayne Heffernan

Disclosure: Long NPWZ, RNNM, BZTG, AEMC Long Oil , Invested in Asia, India, USA, Europe