Bain Macroeconomic Digest_Q1.2010

8/7/2019 Bain Macroeconomic Digest_Q1.2010

1/40

BAI N & COMPANY

Bain Macroeconomic DigestThe New Normal, 2010 and Beyond

March 2010This informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


2/40

Bain & Company has included in this document information and analysesbased on our research and experience. Bain has not independentlyverified this information and makes no representation or warranty,express or implied, that such information is accurate or complete.

Projected market and financial information, analyses and conclusionscontained herein are based (unless sourced otherwise) on the informationdescribed above and Bain's judgments should not be construed asdefinitive forecasts or guarantees of future performance or results.

Neither Bain & Company nor any of its subsidiaries or their respectiveofficers, directors, shareholders, employees or agents accept anyresponsibility or liability with respect to this document.

This document does not constitute (i) an offer or solicitation to purchaseor sell any securities or assets, (ii) a recommendation by Bain to purchaseor sell any securities or assets, or (iii) investment advice of any kind.

2This informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


3/40

Overall, key 2009 macroeconomic metrics trackedclosely with our expectations ...Forecast(7/1/09)

Actual(2/25/10)

GOP, tota l decline -5% -3.8%Unemployment 9-10% peak 10.1 % *peak

Infla tion Flat F lat

Dollar Stab le S tab le

Housing, to tal decline 35-40% total 34%** Although recent data shows improvement, metric may not have peaked at worst levelsSource: Bureau of Economic Analysis; Bureau of Labor Statistics; S&P Case-Shil ler Index; Bain MTG Analysis, 7/1/2009 & 1/20/2010 3This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


4/40

Bain Forecast as of January 20, 2010...however looking forward we are making upwardadjustments to the overall GDP trackUS GDP (Q4 09 Dollars)

,'0-14.0~--~~--~--~--~--~--~--~--~--~~Q1 Q2 Q3 Q4 Q1 Q2

$15.0T14.814.6

~o00C ( 14.4

Currentforecast

Actual--13" . . . . . .

Previousforecast

Q3 Q4 Q1 Q2 Q3 Q4

Source: Bureau of Economic Analysis, Q4 09; Bain MTG Analysis, July 1, 2009 and January 20, 2010 4This informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


5/40

Bain Forecast as of January 20, 2010We have revised our 2010 outlook based on anupdated view of government stimulus programs

Note: Based on estimated +2.6% increase in Q3 (revised) to Q4 (forecast)Source: Bureau of Economic Analysis, Q3 2009 release; Bain MTG Analysis 5This informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


6/40

Last year, we told you the recession would be "bad but notcatastrophic"; this year we're saying the recession will be "good butnot robust"- We are upwardly revising our 2010 GOP number for only one reason -government stimulus, but our view remains unchanged that the year will beprofoundly and broadly sluggish, growing only 1.7-2.0% (4q09-4ql0).

Despite a historically steep & deep contraction, a "slingshot of recovery"remains unlikely due to advanced supply chain management practices.- Financial markets are no longer in crisis, but the cost of credit is not likely toreturn to its pre-crisis levels

- Labor markets remain deeply impaired and may not fully recover until thesecond half of the decade, constraining income growth.

Demand for capital from the public and private sectors is queued upfor a substantial uptick, but supply to the US may slow - higherinterest rates would follow- China is growing at a rate that may be inconsistent with efficientdeployment of capital, creating the risk of a rapid pullback- Europe will be impaired for the foreseeable future - its full attention will be onsupporting its public debt and managing its monetary union

Source: Bain MTG Analysis, January 20, 2010 6This informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


7/40

Near term outlook US household snapshot Global highlights

Implications for investors



8/40

Optimistic viewpoints expect significant lift from a"bounceback" effectReal US GDP (2005 dollars) forecastby Peterson Institute (Mussa)

$14.0T- 0.1D0.2- - - - - - - - - - - - - - - - - - ' 0Post-recession 0.2bounceback D

0.2DD-0.1-0.1 13.913.8

13.6Bain forecast in2005 dollars= $13. 3T -. - - -. -,

13.4 0.5

13.2-

13.0 12.9I I - - - - - - - - - - - - - - - - - - ~12.8~----~------------------------------------------------~--~-2Q2009 Personal Equip/ Chg. Resi- Chg. Comm- Net 4Q2010FConsump- SW in dential in ercial exportstion invest- inven- invest- govern- structuregrowth ment tory ment ment invest- +7.So/0ment

+4.0%

Increase v.2Q 2009Increase v.4Q 2009E

Source: Global Economic Prospects as of September 2009, Michael Mussa, Peterson Institute for International Economics 8This informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


9/40

But we don't see any relationship between thedepth of the recession and the following recoveryRecovery magnitude(recession trough to GDP at +10 quarters)

20%~--------------~

15

10

5 8O + - - - - - - - - - - - ~ - - - - - - - - - - ~ - - - - - - - - ~ - - - - - - - - - - ~o 1 2 3

Recession magnitude(previous GDP peak to recession trough)Source: Bureau of Economic Analysis; NBER; Bain MTG AnalysisThis information is conf ident ial and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

9


10/40

In fact, what we do see is that lean supply chains havecreated a noticeable flattening of recovery patternsRecessions used to be followedby strong recoveries ...+20% vs.trough -1948

-1953-1957-1960-1969-1973-1982+10% vs.trough

Trough~~~~~~--~~~--~~~o 1 2 3 4 5 6 7 8 9 10Quarters after recession trough

...but without a large inventorycycle, recoveries are much flatter+20% vs.trough -1948

-1953-1957-1960-1969-1973-1982-1990-2001

+10% vs.trough

Trough o 1 2 3 4 5 6 7 8 9 10Quarters after recession trough

* GDP is indexed to the real GDP at the lowest quarter during the recession; 1980 recession is not included in lieu of the 1982 recession troughSource: Bureau of Economic Analysis; NBER; Bain MTG Analysis 10This information is conf ident ial and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


11/40

Bain Forecast as of January 29, 2010Bain does not anticipate GDP to return to '08 peaklevels until early '11

15.0

~~~~~~,,,,,,,,,,

Real annualized US GDP level*$15.5T

14.5

14.0 Q4 v. Q4 % change Base case 1.7-2% 2.5% 3.0% Upside 4.0% 4.2% 3.1% Downside 1.0% 1.3% 2.4%(V) ~ .--I N(V) ~ .--I N(V) ~ .--I N (V) ~ .--I N (V) ~ ~ C ' \ I C V ) ~ ~ C ' \ I C V ) ~ ~ C ' \ I C V ) ~00000000000000000 Q a a a Q a a a Q a a a QU") . \.0 \.0 \.0 . I". I". I". . 00 00 00 . 0"1 0"1 0"1 . a a a . . C '\ I C '\ I C '\ I .In \D . . . . . c o O 'l Q ~ ~ ~ . . . f"I00000000000000000 Q ~ ~ ~ . . . ~ ~ ~ . . . ~ ~ ~ . . .00000000000000000 Q a a a Q a a a Q a a a QNN NNNNNNNN NNNNNNNf"I C ' \ I C '\ I C ' \ I f"I C ' \ I C '\ I C ' \ I f"I C '\ I C '\ I C '\ I f"I2.7% 2.4% 2.5% -1.9% 0.1%

13.5+-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.--I No0U") U")o0o0NN

Actual Q4 v.Q4 % change*2009Q4 advanced dollar level; italicized text indicate forecast valuesSource: Bureau of Economic Analysis, Q4 2009 Advanced release; Bain MTG Analysis 11This information is conf ident ial and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


12/40

BaseCase Bain Forecast as of January 15, 2010Our best hypothesis is a return to slow self-sustaininggrowth, with a layer of government spending on top

GDP in early 2010 ispumped up bygovernment deficitspend...

...but underlying privatesector growth resumes aslow but sustainabletrack towards the end of2010.

Inflation Inflation moderatedoverall around 1-20/0 withnegligible pricing power forsellers, but potentialcommodity cost inflationdue to rising global demandand "idle cash" seeking anasset.

Unemployment Unemployment plateaus

at "'100/0 and stays high in2010 with higherproductivity growth andincreasing hours forexisting workers.

I nte rest rates Long-term interest rates(lOY Treasu ries) rise

throughout '10 with anincreasing steepening ofthe yield curve approaching4% (Fed funds to lOY).

Savings Household savings riseto a 7-9% range asconsumers rebuild wealthlevels and higher take-home pay for workers getsdiverted to savings.

US dollar us Dollar remains stablethrough 2010 but beginsa slow orderly decline in2011 with occasionalbumps up/down.

Economy is awakening but still groggySource: Bain MTG Analysis, January 15, 2010This informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

12


13/40

Upside Case Bain alternate scenario as of January 15, 2010An upside case would require believing a latent USconsumer is ready to return to old habits

GDP surprising on theupside with resurgentconsumer spend,significant tech investmentspend, and a build up ininventory to accommodatehigher growth expectations.

Inflation Inflation still moderatedoverall around 1-20/0 withmodest pricing power forsellers, and heightenedpotential commodity costinflation due to rising globaldemand including USdemand.

Unemployment Unemployment falls tobelow g% as hiring picksup significantly whilediscouraged workersremain on the sidelines.

I nte rest rates Long-term interest rates(lOY Treasu ries) rise

modestly throughout '10but a lessening of yieldcurve steepness as the Fedbegins modest tightening inthe second half of '10 andends quantitative easing.

Savings Household savings fall toa 2-40/0 range asconsumers return to pre-recession save-lessspending patterns.

US dollar us Dollar remains stableto modestly positive

through 2010 as foreigntrade partners resume thecash "conveyor belt" tofeed US consumer demand.

Upside is a "new normal" that looks like the "old normal"Source: Bain MTG Analysis, January 15, 2010This informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

13


14/40

Downside Case Bain alternate scenario as of January 15, 2010

A downside case is based on continuing consumerretrenchment with expanding governmental stimulus

GDP stays nearly flat(i.e., 1%) as governmentspending merely backfillsfor continuing pullbacks inthe private sector.

Fiscal stimulus wanes in the2H of '10 leading to adeceleration.

Inflation Inflation moderatedoverall around 1-20/0 withnegligible pricing power forsellers, but potentialcommodity cost inflationdue to rising global demandand "idle cash" seeking anasset.

Unemployment Unemployment plateaus

at "'100/0 and stays high in2010 as the rate of workerdiscouragement roughlyequals the rate of joblosses.

I nte rest rates

Savings Household savings riseto a 5-7% range asconsumers rebuild wealthlevels but decliningpersonal income reducesthe ability to save.

US dollar Long-term interest rates(lOY Treasuries) stayflat throughout '10 withcontinued (or evenexpanded) Fedquantitativeeasing, and zero-percentFed funds rate target.

~Serious possibility, especially if anyunexpected "shocks" come in 2010Source: Bain MTG Analysis, January 15, 2010

US Dollar begins a sloworderly decline in late2010 as global investmentsseek higher risk-adjustedreturns in developingmarkets.

This informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.14


15/40





16/40

The US household balance sheet is tapped out and theconsumer is going to be pulling backNet worth versusdisposablepersonal income

8

6

4

2

6.5

Owners' equity as apercentageof HH real estate valueConsumer creditoutstanding

600/0 5 8 %

O~--~~--~~--~'02 '06 '09q 1

40

20

5 5 % $3B

2

1

2.5

O~--~~--~~~--~'02 '06 '09q 1 O~--~~~~--~'99 '04 '09Source: Federal Reserve Flow of Funds, B.100, June 11, 2009; Bain MTG AnalysisThis informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

16


17/40

Household income growth has suffered and is likely toremain far too weak to drive a consumer-led recoveryQuarterly change in real US disposable personal incomeversus same quarter one year ago100/0

5

-51948 1980 1990 2000 2009

Q3Source: Bureau of Economic Analysis, current to 2009 Q3 17This informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


18/40

There has been a sizable decline in the percent of the USpopulation working, levels not seen since the early 80'sEmployed population versus total US population

62%

60%

58%

50%

48%en r-t " " " r-, 0 (V') ~ 0"1 N LI) en r-t " " " r-, 0 (V') ~ 0"1 N LI) en" " " LI) LI) LI) ~ ~ ~ ~ r-, r-, r-, en en en 0"1 0"1 0"1 0"1 0 0 0I I I I I I I I I I I I I I I I I I I I IC C C C C C C C C C C C C C C C C C C C cro ro ro ro ro ro ro ro ro ro ro ro ro ro ro ro ro ro ro ro ro1 '" " " \ 1 '" " " \ 1 '" " " \ 1 '" " " \ 1 '" " " \ 1 '" " " \ 1 '" " " \ 1 '" " " \ 1 '" " " \ 1 '" " " \ 1 '" " " \ 1 '" " " \ 1 '" " " \ 1 '" " " \ 1 '" " " \ 1 '" " " \ 1 '" " " \ 1 '" " " \ 1 '" " " \ 1 '" " " \ 1 '" " " \

Source: Bureau of Labor Statistics, December 2009; Bain MTG Analysis 18This informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


19/40

Labo r inpu t requ ired in th is recess ion has dec lineds teep ly because o f con tinued p roduc tivity ga ins

Total labor output~ = = = = = = = = = = = = = T = o = t = a = I = l a ~ b ~ o = r = i = n = p = u = t = = = = = = = = = = = = ~ I I ~ = = L a = b = o = r = = p r = o = d = u = c = t " = l v = i t = y = = ~

# of w orkers I I hours/worker 1 1 . . . . . _ _ _ _ ou_t_p_u_t/_w_o_r_ke_r_ ____ .

135......._------------ 33.0......._-------------t,...o U") 00 (J"\ 0o 0 0 0 0c c cm m m. . . . . , . . . . . , . . . . . ,

Total employment(millions of workers)150

145

140

Average weekly hours,private industries34.5

34.0

33.5

>ozU")ocm. . . . . ,

00ocm. . . . . ,cm. . . . . ,Source: Bureau of Labor Statistics, November 2009; Bain MTG Analysis

Output per worker,indexed levels1 . 4

1.3

1.2

1.1

1.0~-------------------------oocm. . . . . ,00ocm. . . . . ,

(J"\o>ozU")ocm. . . . . ,>oz

This informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.19


20/40

Optim is tica lly , it cou ld be 2017 be fo reunem p loym en t fa lls back to a "no rm a l" 5% leve l"Most forecasters including the Fed are currently looking at growth in2010 but not growth so rapid as to substantially lower theunemployment rate." - Ben Bernanke, October 1, 2009

Cumulative '07-'09 job deficit10M 9.4M

o ~ - - ~ - - - - - - - - ~ - - - - -Deficit

864-

2

1--------------------------------11 2.2

0.9-1.2

,.,." -----S ' - - - - -

Jobscreated Labor Net growthforce to addressgrowth unemployment

~Optimistically, it could take7.6 years to return to50/0 unemployment

Note: Assumes '91-'01 job growth expansion average and BLS estimate of '06-'16 labor force growthSource: Rutgers Universi ty, September 2009 report 20This information is confident ial and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


21/40

a rona Y , e s a ow inven ory 0 ousmq wal ingto hit the m arket is 78% of the s ize o f "actua l"lis tin sNumber of house listings for sale,actual and shadow (September '09)

150,000 Shadow listings1------------- .. Notice of DefauIt :1 DAuction Listings :11 DREO 1L. IDListings

50,000

100,000

a (f) 0 (f) X !..... ~ c o "0 0 c o O J "0 U O J (f) C .Yc o en O J O J 0 0.. C en E .j...J .j...J c 0 .j...J c o 0 !.....C > 0 c .j...J 0en O J O J !..... E c o c o c o .j...J c o 0 .j...JO J O J c .j...J 0.. U c o c o c o (f) > -> 0 en 0 O J O J c o c o .j...J :: E O J O J ..c "'C 0 0c 0 I- !..... ..c .j...J > c o $:..c 0 O J 0 CJ) (f) c o(f) c 0.. c 0.. U O J c o ..c O Jc o c o (f) c u : s u z_J CJ) 0 c :: E_J c oCJ)Shadowvs. 3 . 2 2 . 4 1 . 9 1 . 8 1 . 8 0 . 8 0 . 7 0 . 7 0 . 7 0 . 6 0 . 6 0 . 6 0 . 5 0 . 5 0 . 4 0 . 3 0 . 2 0 . 2 0 . 1 0 . 0actual listings

Source: Amherst Securities; Trulia 2 1This informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


22/40

espi e e emporary ounce In ousmq prices,we anticipate prices need to fall lower beforestabilizinS&P Case-Shiller Index(January '~O = 100)

240 Case-Shiller homeprice level index220

---- ----- --- --. . . '"_ ... ... ... Forecast sustainableprice level

200180160140120

Source: Standard and Poors Case-Shi ller Index, CSXR, through October 2009, release as of December 2009; Bureau of Economic Analysis; Bain MTG Analysis 22This information is conf ident ial and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


23/40





24/40

G20 governm ent response w as sw ift and dec is ive ,averag ing 2% o f to ta l GDPG20 crisis-related interventionas a percentage of GDP

1

2009 Estimated 2010 Planned

4

3

2

o

Note: 2010 estimates include phased implementation of stimulus spending init iated in 2009Source: "The State of Public Finances: A Cross-Country Fiscal Monitor", IMF 24This informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


25/40

Unemployment rates have risen across manyregions across the entire globeUnemployment rate

2 0 %

15

10-

5

10.9% 9 .8% 9 .6% 9 .4% 9.2%t . . . .t . . . . ~ I - :7. 7 % i~'5'6;~ . . t 6. . .8.o 6 1 0 1


26/40

Japan -0.7 -5.7 1.4 1.5Euroland 2.7 0.6 -3.9 1.2 1.1UK 2.6 0.6 -4.3 1.9 1.3Europe 2.9 0.8 -4 1.4 0.9China 13 9 8.4 11.9 9.5India 9 6.7 6.1 7.8 7.5Brazi l 5.7 5.1 -0.4 4.8 4.2Russia 8.1 5.6 -7.2 4.5 3.3BRICs 10.4 7.5 4.8 9 7.5AdvancedeconomiesWorld

2.85

0.62.7

-3.2-0.9

1.94.2

23.7

*Consensus forecast as of October 2009Source: Goldman Sachs, November 2009; Consensus forecasts, October 2009; Bain MTG Analysis 26This information is conf ident ial and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


27/40

But Europe's banking problems have only temporarily beenput on ice, and to-date are largely un-realized

Realized and Expected Bank Writedowns$2T

1

$1.6T

Expected $1.0T.

Real ized $O.2TI Io Europe Un ited S ta tes Asia

Source: International Monetary Fund, Global Financial Stabil ity Report, October 2009 27This informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


28/40

Greece has the most dangerous combination of high debtlevels and a high foreign-held ratio

European government gross debt levels as a % of GDP (2009) o Domestic held

a

orerqn e115 111roo- roo-r-- 97- I' ~Stability & growth76 75 74 pact - maximum- - roo- roo- 69 debt level- 66 63 ./r-- - 61- - = - = roo---- -- - - - - ---~ r- - - - - - I- r--'r-~ ---------- ------------- - ~ 50roo- 43 43r-- 40r-- roo- - 37 36- roo- roo-I---r--- r--- - r---> - O J E O J ro > - ro ~ (f) "'0 C >- C "'0 .s : "'0 > -- u u c c : : : : > "'0 c .- ro O J c !. . . . C O Jro O J ::J C en ro "'-' c ro ro : s : "'0 ro ro ro .s :"'-' .- ::J 0..1--1 O J en ro E (f) ro !. . . . O J "C E - !. . . .!. . . . !. . . . "'-' ::J O J (J) C ::J!. . . . "C 0 : s : O J~ O J U. !. . . . !. . . . c I-e o 0 O J O J 1--1 Z (J) N O J U.c, .c "'-'~ .- 0"'-' : s :

OF h Id125%100

75

50

25

O JZ (J)

Note: Not all countries shown are part of the Eurozone or subject to the Stability & Growth Pact harmonization agreementSource: Euromonitor, National Statistical Offices/Eurostat/lnternational Monetary Fund/OECD 28This informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


29/40

$2,000Additional borrowingcapacity if debt-to-GDPpushed to 100%

r ' - - - - - - - - ~ , - - - - - - - - ,

1,000

642

853

1,494

Potential highest debt-at-risk, based onamount of borrowing from foreign holders

D-358 I I-120

o ~ - - - - - - ~ - - - - - - - - - - -D-350

-1 00 -1,292 -770, >- Q) Total Q) "'0 c o C > - Netc u u c .-c o c Q) c o en c o c ocapacity : : : J 0. ..j...J surplus/E c o Q) . . . . . . . .L.. L.. Q) ..j...J (j)L.. u .. to lend c . ! J L.. L.. deficitQ) . . . . . . . . 0c . ! J c,'" ~v

Already in Next highest potential for distressdistress

29

-145

This informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


30/40

G loba l g row th (o r "non -shrinkage") dependsa lm ost en tire ly on APAC ex. Japan grow th2009E growth rate, by share of global GDP

10%

5

g % D APAC Countries/Regions5 %

2%')% 20/0

I L..(_-1%-1%

- 3 % - 3 %- 4 % ---5% -5% -5%

'--_-7% -8%

o

-5

-10 c o c o .j...J c o co V l "0 (f)e (f) u (/) 'N ::: a ~"O O J O J"0 CO .;:: "0 > o.LO J oC!l ..c"O:: E "0 Wx .j...J c o> (j)I... (j) 0O J 0s:. . . . ,0

c o roc O J e 0 c oO J V i !.... Q. c o U (f)!.... U l O J 0 Q. X (f) :::J.j...Jr::t.(f) !.... c o O J ::J0 x c o ::J . . . :: E c r : :!.... O J U J U J::J (f)..........U J ~u!.....j...JeO JU

30Source: International Monetary Fund, World Economic Outlook, October 2009; Bain MTG AnalysisThis informat ion is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.


31/40

China 's lend ing is up 2x by add ing capac ity , no tlike ly be ing dep loyed op tim allyT ota l bankloans in USD *$800B

400

600

200I

0 '2007-01

r-e- r-r-

YoY % changeIn bank loans-40%

10

. . . -30

20

~O2009-08

China may be creating a large portfolio of non-performing loans* Based on 6.823 Yuan to 1 US DollarSource: People's Bank of China; Bain MTG AnalysisThis information is conf ident ial and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

31


32/40

Moreover, China's residential real estate market isinflating - it's acting like a manufactured currency3 5 0

Bain Macroeconomic Digest_Q1.2010

Documents

Transcript of Bain Macroeconomic Digest_Q1.2010