From China-US trade friction to observe Southeast Asia,Phnom Penh became the best choice for investment.

 From China-US trade friction to observe Southeast Asia,Phnom Penh became the best choice for investment. 

Summary: Choose Phnom Penh to maintain the value of your asset. Away from global financial storm.

From Titan Stone group.

The world's two largest economies, the trade friction between China and the United States has been intense since last year (2018). The dispute between the two countries has affected the world economy and the global supply chain industry has been disrupted. With the recent the Sino-US trade conflict, what is kind of influence will impact on other countries? How about the influence to the Southeast Asian countries which have developed rapidly in recent years?

The start of Sino-the US trade war

The trade deficit is a long term issue between China and the United States. After China's reform and opening up, thanks to its own advantages to attract international companies to set up their branch company or production bases.  With the continuous improvement of Chinese companies, China has gradually stood on the position of the world production base. Because Made in China's products are cheap with good quality, the United States imports more and more Chinese products, and China has become its largest trading partner and the largest source of imports country.

Although China is the third largest exporter of the United States, the speed of exporting US products to China is far less than the growth of demand for Chinese companies to purchase from Chinese manufacturers. In 2017, the trade deficit between the two sides reached 375.5 billion US dollars, this is a new peak record . Compared with 1990, it has increased by 3,500%. The growing deficit issue can be the most difficult issue for the US presidents.

Sino-US trade deficit data in years from BBC

The R&D capabilities and product quality of Chinese companies are loved by global companies. Therefore, in 2015, Chinese government proposed the Made in China 2025 program, hoping to transform from a low-end product manufacturer industry to a high-end products industry. This program covers many high-end industries, such as newt-generation information technology, aerospace equipment, AI, biochemistry, and ship technology. The most notable of these is the formulation of the 5G standard. The 5G is 100 times faster than the current 4G and is an important technology supporting the next generation of infrastructure, autonomous driving, Internet of Things (IoT) and communications industries with a business opportunity which worths to $12.3 trillion.

According to the Japan Financial News, 34% of patent applicants for 5G related technology are Chinese manufacturers globally. Among them, Huawei has the world patent with the most 5G technology, and ZTE ranks fifth place, following to Huawei, Nokia, Samsung and LG. Once the Made in China 2025 project goes well, China will become the leader of new technology industry in the future.

2025 Made in China Program Industry from Money DJ

4G and 5G patent owners countries from Japan Financial News

China’s performance has become the biggest threat to US President Trump’s  making the United States great again. In order to prevent the United States from losing its dominant position in the global trade and economy, in 2018 the United States announced a 25% high tariff on products imported from China with a total value of USD$50 billion, and a 10% tariff on other 200 billion products based on 301 Terms. China has also proposed counter-measures to raise taxes on 50 billion US products. The scale of trade conflict between the two sides has escalated.

Although during the two sides negotiation period and they delayed the implementation of high tariffs, they have already affected the global economy and disrupted the layout of supply chain manufacturers. On May 5th this year, the United States imposed a 25% tariff on Chinese products of 200 billion U.S. dollars from May 10th  without any notices, and the remaining $325 billion products would not be able to escape the threat of high tariffs.

Threat to developed country

Before the Sino-US trade conflict, the global economy has spent a nine-year long stable period. After the financial crisis in 2009, countries adopted Quantitative easing (QE), then the global economy grew rapidly. The IMF data shows that since 2010 the global economy has begun to grow substantially. In 2018, the total GDP of the world and developed countries was 1.4 times and 1.23 times than 2009, respectively. National stock markets also rose strongly, especially in developed countries. For example, the US Dow Jones Index rose from 7384.61 points in 2009 to 26,344 points in 2018; the US Nasdaq index rose from 1469.94 points to 7946.87 points; the London FTSE 100 index increased from 3753.68 to 7724.22. The stock prices of companies have also broken past records, and the company's market value is remarkable. For example, Microsoft , Apple and Google have reach to trillion dollars, Facebook has surpassed Thailand and Norway's national GDP, and Amazon has surpassed Saudi Arabia.

GDP of developed countries in years from IMF

Naskq index in years from Google Fiance

Except the stock, the price of housing is keep roaring. The EU housing price index annual growth rate from negative 6% to a maximum of 4.61% in 2018; the US S&P top 20 cities house price index rose from 141.56 in 2009 to 214.93 in the second quarter of this year. According to the Knight Frank survey, the value of real estate in less than 20% countries in 2009 which was increased to 89% in2017.

Housing price change countries in 2008-2017 from Knight Frank

Risky assets are facing challenges since last year's Sino-US trade confilict begun. In December last year, the US stock market suffered a bloody shock. The five major stock markets - Dow Jones, S&P 500, Nasdaq, Russell 2000 and Philadelphia Semiconductor - fell sharply. The Dow Jones fell 14.67% ，the 2009 Lehman Brothers bankruptcy . The EU's long-term and short-term yield differentials have narrowed since this year, and the US Treasury yield has shrunk to only 0.21. Housing prices in the United States, Australia and other European and American countries also began to decrease.

 European countries long term and short term interest margin in years from MacroMicro.me

Today, the trade conflict has begun. The major international institutions have reduced their global economic growth in the future. The IMF estimates that this year's growth rate will be only 3.3%. The World Bank will have only 2.9% and 2.8% of global economic growth this year and next. Deng Zhenyue, general manager of Hong Kong's Titan Stone Group, he believes that the assets of advanced countries have risen rapidly in the past few years to surpass past records and speed resulting in assets being overvalued. The current price does not reflect its real value, and risky assets face a threat.  With the negative impact of the Sino-US trade war, he suggested selling risky assets at this time, stay away from these developed countries.

Southeast countries step in the high growing period.

Developed countries facing an unprecedented economic crisis. On the contrary, Southeast Asia has a bright future. ASEAN has a population of 650 million and is the third largest labor market in the world. And the population is young with an average age below 29 year-old. Foreign direct investment reached US$98.04 billion, making it the fourth largest export region in the world. There are currently about 60 million middle-class people, and it is estimated that it will reach 125 million by 2025. ASEAN will become the most promising r market beside China.

According to Lydiai, a senior partner at McKinsey & Co., he said that nearly half of the world's biggest growth drivers have been created in Southeast Asia over the past 50 years. The company also estimates that the Southeast Asian economy will reach 50 trillion US dollars in the next 10 years. The Standard Chartered Bank report also pointed out that the next 10 years will be the world in Southeast Asia and South Asia. Singapore's sovereign wealth fund Temasek Holdings and Google jointly released the 2025 Southeast Asian Network Economy Report, which predicts that the network economy in Southeast Asia will grow to $240 billion in 2025, 3.3 times that of 2018. The IMF predicts that Southeast Asia's economic growth will remain above 5% in the next few years, and its performance will outperform global and developed countries.

Area financial increase rate in years from IMF

This trade friction has prompted many large enterprises to transfer production bases, and Southeast Asia, which is close to China, has become the primary choice in the eyes of manufacturers. Southeast Asia has the advantages of abundant natural resources, extensive land, young and low-cost labor, and the establishment of this plant can not only reduce production costs, but also away from high tariffs between China and the United States.

The general manager of Hong Kong Titan Stone Group Deng Zhenyue said that Southeast Asia has benefited from Sino-US disputes, and global capital and production will flood in, pushing up the economic development of this market star. He believes that Southeast Asia will step in a high growth period and usher its golden decade.

Global institution and investors choose Southeast Asia to invest.

Many investment institutions are optimistic about the Southeast Asian market. Alibaba invested in Southeast Asia's e-commerce platform - Lazada to acquire 83% of its shares, and Ali Holdings invested in Tokopedia, the largest e-commerce platform in Indonesia. Its Ant Financial Service merged with the Southeast Asian payment platform helloPay. Hyundai Motors is betting $250 million in the Southeast Asian car service provider Grab. Traveloka received financing from JD.com, Gaochun Capital and Sequoia Capital. Tencent and Didi Travel also invested in Southeast Asian companies such as Go-Jek and Grab to deepen the layout of the company in the region.

In 2017, the total private equity in Southeast Asia reached US$23.5 billion, a year-on-year increase of 300%. In the past five years, nearly 500 venture capital companies have been established in Southeast Asia. Singapore Capital Investment Company B Capital, led by Facebook co-founder EduardoSaverin, raised up to US$360 million in the first phase, and Cheung Fung Investment, a subsidiary of Temasek Holdings, also received foreign investment from Thailand’s Kai Tai Bank and Taiwan’s Cathay Bank. I got $210 million.

Many companies choose to transfer or increase investment in Southeast Asia to maintain product competitiveness, with more than 3,000 US companies in China. According to the 2017 ASEAN Business Outlook Survey, 87% of companies expect to increase trade and investment in ASEAN over the next five years. For example, Kent International, a US bicycle company, moved its Chinese production factory to Cambodia. The US travel backpack brand TortugaBackpacks found a new supplier in Vietnam. Some of the famous US heavyweight brand Harley Davidson Inc. moved to Thailand. American shoes brand StevenMadden announced the production of handbags in Cambodia. In addition, Japan's Matsushita Electric Co., Ltd. transferred production and exports to Malaysia. Apple Power Components Supplier Delta Electronics Expands Production in Thailand, Dr. Audio, Headphone Manufacturing Taiwan Melody has planned to manufacture some products in Thailand.

Due to its unique advantages, Southeast Asia has attracted the attention of global investors. Attracting attention to the manufacturing industry, private equity funds, new venture funds and other funds, the global inflow of funds, Southeast Asia ushered in an unprecedented investment boom.

2019 best choice for invest , PhnomPenh ,Cambodia.

Asset is risky when we facing the continue disputes and unstable global finance. Thus no matter the companies or individuals are seek a country to keep their asset safe. In Southeast Asia whose stepping in developing period,Cambodia has best performance with 7% financial growing rate. According to the IMF, it will remain 7% in two recent years. The remarkable performance of Cambodia, makes Cambodia more attractive for investors. Phnom Penh got advantages in transportation and human resource and currency, and fiance thus Phnom Penh play a important role in Southeast.

1. Phnom Penh will become a transit center  in the future.

Cambodia is the heart of Southeast Asia, enabling it to connect the Indochina and neighboring countries in both economy and transportation. Located in an important position in the Gulf of Siam, it is a must-have for shipping in Southeast Asia. The capital city of Phnom Penh is important to the Asian Railway. From east we can reach to Ho Chi Minh which is directly connected to Vietnam and China, and the west is heading to Bangkok, Thailand, Singapore and Malaysia. The superior geographical location will make Phnom Penh a center for future, and will affect the transshipment of resources in the Indo-China Peninsula.

2.The center for global supply chain industry in future.

75% of Cambodian are under the age of 35 and have enough youth workforce. Compared with neighboring countries such as Thailand, Vietnam, Malaysia, the Philippines, etc., Cambodia has lower labor costs and a more competitive advantage. In addition, a large amount of land can supply enterprises to set up production needs. In recent years, it has attracted investors' attention. In 2017, the amount of foreign direct investment increased by 20% from the previous year to $2732.15 million. In the face of a dangerous international financial situation, Cambodia has become the best place for the supply chain industry. As the economic and commercial center of Cambodia, Phnom Penh will naturally become an excellent place to set up its headquarters or subsidiaries.

3.The financial center of Southeast in future.

Foreign-funded enterprises can hold 100% share of the company, Cambdoia has no foreign exchange control with open economic policies, so that foreign investors can truly have the company's management rights and more effective financial operations. The US dollar is highly tradable in Cambodia and the transactions are denominated in US dollars. Especially when the US dollar is acceptable and the global exchange rate fluctuates drastically, no exchange loss is a big advantage for foreign companies investing in Cambodia. With the most open economic and monetary policy in Asia, many financial investment institutions will flood into Cambodia, with a large amount of investment funds and capital inflows. In order to serve its customers and fund management, these financial investment companies will set up a company in Phnom Penh, the economic center of Cambodia, to turn Phnom Penh into the financial center of Southeast Asia.

Observing the world situation and the advantages of Phnom Penh, the general manager of Hong Kong Titan Stone Group,Deng Zhenyue believes that Phnom Penh has the most open financial policy in Southeast Asia, accompanied with the circulation of the US dollar and its unique geographical location, making it a financial center in Southeast Asia. Coupled with Cambodia's own large development potential, Phnom Penh will be the best choice for investors in 2019. Choosing Phnom Penh as the asset investment place to avoid the impending global financial turmoil then sustain the value of assets.

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