Tuesday, March 20, 2007

Global Stock Markets

Global stock markets have not performed particularly strongly over the past few weeks. I’m going to take this opportunity to offer my thoughts on some stocks that will be affected by the Chinese economy. It feels like every company in the world is counting on China to deliver growth in the coming years. However, some are clearly succeeding more than others. Here are a few picks from my own personal experience:

Carrefour – Okay, I’m biased. But Carrefour has done really well in customizing both the product selection and retail format to meet the demands of the Chinese shopper. In the US, I love Wal-Mart and Target. Here, it’s Carrefour all the way.

Ikea – I've been to the Ikea in Shanghai; it’s amazing. First, it appeals to the Chinese shopper in being cheap, but somehow still name brand. Second, its biggest drawback in the US, the need to assemble your furniture using those ubiquitous Ikea hex wrenches, is eliminated here due to low labor costs. You can pay Ikea to deliver and assemble the furniture for 30 RMB.

It's just like an Ikea anywhere else: crowded, filled with brightly colored furniture, and smelling like Swedish Meatballs. Too bad Ikea is a private company. They are probably riding the China housing boom more than any other company.

What companies do I think are less likely to benefit from a stronger China?

McDonalds – McDonalds is fundamentally an American company. They sell burgers and fries. Chinese people want chicken and corn. Is it still McDonalds if the menu is completely different? Do people still care that Sprite is owned by Coke when they buy it? I don’t think so. Unless McDonalds forms a different brand to serve the Chinese market, I doubt they will grow substantially.

Boeing Asia is the largest market for Boeing planes. Seemingly every flight in Japan uses a 747, while many domestic flights in China are on 777s and Airbus 330s. The China market for airplanes is poised to grow rapidly as airlines replace their Russian Antonov hand-me-downs for modern planes. There is no way that the Chinese government is going to allow sales and funds for research and development to flow to an American company supplying US warplanes and Japanese passenger aircraft. I’ll bet that despite the demand for highly profitable wide body planes like the 747, China’s growth will not benefit Boeing as much as Airbus (thanks to its A380) and the still nascent domestic builders.

Sunday, March 18, 2007

Asian Airport Faceoff

The airports in Singapore and Hong Kong are known to be great airline hubs. They both have great facilities, good food options and duty free stores. However, having spent time in both, I think I have found a favorite.

(Changi International) Airport lives up to its reputation. As the hub for Singapore Airlines, it strives to provide a terrestrial counterpart for the top notch service you get in the air with Singapore Airlines. Last week, after taking the redeye from Shanghai to Singapore, I napped in a lounge and took a shower before my meeting. I almost felt as if I hadn’t flown the night before. I was well rested and certainly refreshed. The airport features multiple gardens (albeit small), free internet access, and a variety of lounges, hourly hotels, salons, and gyms to make any stay comfortable.

There is also an area that features Xbox 360s for free game play between flights.
The duty free options are relatively good as well, featuring stand alone stores for Bally, Hermes, Coach and more. However, the one draw back of the airport itself is that as a tropical destination, it has a floral motif and overall environment that strikes me as more touristy (a la Hawaii) than corporate. Also, although it is connected to downtown Singapore via Metro, you have to switch lines, and it is a pretty slow ride relative to the distance covered.

Hong Kong Airport matches its home city in excitement and ease of navigation. There is no shortage of retail and food options in this airport. Multiple sit down restaurants and an international food court featuring Aisen Ramen, Burger King, and Ben & Jerry’s provides sustenance for even the pickiest diners. The duty free selection is quite extensive.

Hong Kong is known for shopping and the airport does not disappoint. Unlike Singapore, the airport is a little bit more spread out, so travelers are forced to refer to the terminal maps to find the retailer they are looking for, but the breadth (including Coach, Baccarat, and Gucci) is quite impressive. The airport also offers a guide that details suggested itineraries by length of layover. Three hours is sufficient for a quick jaunt downtown. Five hours can get you to the top of Victoria Peak. This is aided by the fact that the airport is connected to Kowloon and downtown Hong Kong via Airport Express, a high speed rail line. It’s not particularly cheap (~$12 for a one way ticket), but it’s fast (~25 minute ride) and runs every 12 minutes. Also, free wireless internet is a huge bonus (compared to Singapore’s free internet located at kiosks).

Both airports offer more amentities and a more enjoyable experience than any US hub like Chicago, Dallas or Minneapolis, but overall, I’d say the Hong Kong airport is a better facility. It provides a lot of services, good selection, and convenient transportation options. Now if only Singapore Airlines would move their hub to Hong Kong

Saturday, March 17, 2007

London calling

Yet another busy week of travel. On Thursday night, I flew down to Singapore for a meeting on Friday morning. I then flew to Hong Kong on Friday night to spend the weekend with friends and get ready for a week of work in Hong Kong. I was supposed to return to Shanghai Thursday night, but a last minute change in plans sent me to London for a business meeting. I may have to rethink the title of this blog and change it to Half of the Yearofthepigshanghai.blogspot.com.

In all respects, it was a whirlwind trip. I was in London for a total of 9 hours. Flew in on the redeye from Hong Kong on Cathay Pacific at 5 AM. Flew out on British Airways’ 2 PM flight to Shanghai. However, in my brief visit, I had a few experiences that underscored my opinions about Shanghai so far.

- The first thing I did when I got off the plane was go to the ATM and get cash. As I have said many times, China and Asia generally are very much cash-based. However, I never touched the money I took out. The car to the hotel was paid with credit, the hotel and breakfast were covered with a credit card, the limo back to Heathrow was charged to a corporate account. My laptop bag currently has 4 plastic ziplock bags, each containing a different currency – one with RMB, one with Hong Kong dollars, one containing Singapore dollars, and now one with British Pounds. Life would be a lot easier if I could just carry a single piece of plastic.

- It was a gorgeous day in the City. London was recently reported to be the most polluted capital city in Europe. All I saw were blue skies, a few clouds, and crisp clean air. It’s such a change from Shanghai, where I have experienced one clear day in total. I’m heading to Vancouver in 3 weeks. I can’t imagine how clean British Columbia will seem after a few months in China.

- Globalization is an increasingly powerful force in the world. London’s streets are filled with black cabs. Those cabs are now being made in China. The company that manufactured them was purchased by a mainland automobile manufacturer, who now has plans to leverage their lower costs and take the design global.

- Labor is so incredibly cheap in Asia. Upon arrival, I checked in to a hotel downtown to freshen up. I spent a grand total of an hour in the room, for which I paid £265 + VAT. Grand total of $615 for one hour, not including the charge for internet access. For that amount of money, I could have gotten 60 custom shirts made in Shanghai, 75 hours of massage, or 400 hours of maid services.

Monday, March 12, 2007

Asian tour 2007

I haven’t posted for the entire month of March as I have been traveling quite a bit for work. But the traveling has given me the opportunity to provide my thoughts on some of the major Chinese-speaking cities in Asia. I’ll offer a quick summary of each city now and then provide greater detail in later posts.

Taipei. As I noted earlier, I spent Chinese New Year in Taiwan. I had been to Taipei as a child close to 20 years ago, but the city and the country have changed drastically since then. It seems to be where many cities on the mainland may find themselves 15 years from now – cleaner, more western, and more expensive, but retaining a distinctive Chinese culture. Taiwan is struggling to find its place in the world, after being derecognized by the United States in the 70’s, experiencing an economic boom with the other Asian Tigers in the 80’s, and being overshadowed in the late 90’s and 2000’s by China’s tremendous development. Taipei is a comfortable city -- a place where you could actually have an apartment, go shopping at Costco or Wal-Mart, and then buy groceries from the traditional market and visit the temple on the street corner.

Singapore. The city-state has a well deserved reputation of being clean and well run. It’s incredibly different from Shanghai, Beijing or Hong Kong. Everyone speaks English very well, despite the fact that the official language is actually Malay. It has a unique South East Asian flavor to everything, from the people’s accents, to the tropical flavors in the food, and the way people dress (although this may be more heavily influenced by the equatorial climate). My first reaction to Singapore is that it’s a city made up entirely of expats. The United States is a nation made up of immigrants. Everyone is originally from somewhere else, but has adopted the American lifestyle. Singapore does not seem to be as much of a mixing bowl. There are many expats from all over the world, who have moved there to work. However, some seem to stick out much more against the backdrop of the Chinese and Malaysian immigrants who perform the services that keep the wealthier immigrants living in comfort.

Hong Kong. This is the first city in Asia where I could see myself fitting in. It’s a very comfortable and western city. That’s not to say that I would like to live here for a long period of time, no more than I would like to move to New York City. However, fewer things are as starkly different from the West, and it’s manageable enough that I think I could know the city as well as a local after a few years. In many respects, it’s like Shanghai-light. A few friends happened to be in Hong Kong while I was there. They noted that it seemed a little dirty (they had just arrived from Tokyo), very crowded, and that the people were sometimes rude. I can’t wait until they see Shanghai where the subway crowds won’t even let you off the train as they push on to it. In any case, Hong Kong is an amazing city that I highly recommend for a few days. Like Singapore, it’s not very large in area, and you could probably see most of the highlights in about 48-72 hours. But if you’re flying through Hong Kong airport anyway, take some time out, check out the sights, and do some shopping.