Horizons newsletter – Week 21 // 2017
Horizons is a bi-monthly Dasym Research initiative to show you how the Dasym themes have been in the news. We publish the Horizons on our website and as an email newsletter. If you wish to receive the email, please contact Investor Relations.
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The bigger picture
Casting your thinking into a visualization is a great tool to sharpen your ideas. That is why at Dasym in 2014 we began creating, together with Jam Visual Thinking, a set of drawings to explain our philosophy and investment themes. As our ideas evolve, we periodically review our themes and the drawings as well.
The most essential changes in our renewed thematic drawing concern the three media-related themes. These have a clear focus on three elements within the sector: Engaging Relevance focuses on the increasingly important role of relevance in the changing landscape in advertising; Media Matters is about the growing value of unique content; and Fantainment is centered on the value of live events. In addition we added Hands-on Healthcare, our new theme, which concerns the pressing need to reorganize healthcare to make it more efficient, for instance by making better use of patient data, analytics and tele-health solutions. The revised and interactive drawing can be explored here.
Is Europe finding its way again?
Over the last decade, the European Union has received a lot of criticism and negative coverage. The euro crisis surrounding the sovereign debt of countries like Greece raised existential doubts about the future of the union. The migrant crisis of 2015 emphasized these doubts. Last year’s rise of populism brought fresh concerns about this year’s important European elections, but the tide could be turning. Centrist powers have fended off populists in the Netherlands and France and will easily do so in Germany in September. With fresh mandates, a renewed pro-European Franco-German axis could push policies to strengthen the union. On the economic front, Eurostat estimates that in Q1 2017 European growth was 0.5%, surpassing U.S. growth (0.2%). Debt is decreasing as government balances improve and even Greece has a budget surplus. Moreover, outside pressure, from Brexit and President Trump’s policies, to continuing confrontation with Russia and Turkey, will push the continent closer together. Risks remain, particularly in Italy, but things are changing. After Germany’s elections, 2018 could bring a new élan of European unity.
Divergence within the BRICS
Brazil, Russia, India, China and South Africa – countries that make up the ‘BRICS’ – are grouped together because of their size, rapid development and great growth potential. However, China and India have seen much higher growth rates than the others in the past few years. In part, production factor contributions in India and China, such as big capital investments (mostly China) and a fast-growing labor population (mostly India), can explain this. More notably, total factor productivity – the efficiency of both factors in the production process, and an indicator of an economy’s long-term technological progress – has grown much faster in China and India than in Brazil, Russia and South Africa. As Indian and Chinese workers produce more efficiently, they can demand higher wages (neoclassical economics states that wages should be equal to the marginal revenue productivity of labor), shifting more of their disposable income towards consumer discretionary. With a labor force of more than 1.3 billion people (more than a third of the world’s total labor force), Chinese and Indian consumers are the building bricks of tomorrow’s markets.