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3M exec predicts long economic slowdown

Posted by pakin On February - 2 - 2016 ADD COMMENTS

HAK CHEOL SHIN, executive vice president of international operations for US-based multinational industrial conglomerate 3M, believes the world is at the start of what will be a prolonged period of slow economic growth that will claim many casualties in the corporate world.

Hak said one of the main contributing factors for this was the emerging-market slowdown, particularly in China, which he labelled a new phenomenon.

Other major factors he cited as among the major causes included the collapse of prices for oil and gas and other commodities, and the weakening of global currencies.

The United States will be among the very few economies that will be an exception to this global slowdown phenomenon, he said.

Despite the gloomy outlook, Shin believes the Chinese economy will not have a feared hard landing.

He said the low-growth problems were compounded by “mega-events” such as geopolitical incidents that were unpredictable. As a result, he said companies had to improve their “responsiveness” and learn to operate in the “new reality”, such as over-capacity being a problem, particularly for multinational companies.

“Two key words: quickly and effectiveness. We have to become like a chameleon. Many companies will become history,” he said.

“Any company, small or big, cannot be complacent at this period.”

In a bid to cope better with the forecast prolonged slowdown, 3M has developed what it calls the “play book”, which is in essence “scenario planning” on how it will respond when a major event erupts.

The company’s diversified products, markets, and geographic portfolio will help it weather the current situation, he said.

“Healthcare, consumer, safety businesses are among [our businesses] that are still doing very well. Domestic-driven industries tend to do better in this period,” he said. “While people are not putting in new fibre-optic cable, they’re still going to hospitals.”

Hak said 3M executives considered themselves “portfolio managers” whose task was to make the right choices at the right time involving three dimensions – the product, market, and geographical portfolios. Given the current economic scenario, the US$31.8-billion (Bt1.1 trillion) company is investing in growth areas including Southeast Asia, he said.

And despite the challenging economic times, he said 3M was increasing its research and development budget.

“Since our current CEO assumed the post in 2012, he made a statement to increase R&D from 5.5 per cent to 6 per cent of sales. We’re following his statement,” Shin said.

“R&D and commercialisation are probably our main strategies to grow. We’re investing $1.8 billion every year in R&D,” he said.

Hak said Thailand was 3M’s biggest market in Southeast Asia, accounting for about 35 per cent of its sales in the region, which totalled about $1 billion annually.

Thailand is also one of 3M’s most “penetrated” markets in the world, as measured by the size of its business in the country versus the size of the economy. He said the company tried to replicate its success in Thailand to elsewhere.

The company appointed Napaporn Ratanasaenghirun as its first Thai managing director last November. Napaporn had previously led 3M Vietnam, where she doubled 3M sales during her three-year term. Hak said 3M Thailand had continued to outperform the economy, growing its business at a higher percentage than the growth of gross domestic product for many years. It plans for that to continue.

HONG KONG – Malaysia’s ringgit and Indonesia’s rupiah led an emerging market rally against the US dollar Friday while Asian equities also pushed higher after minutes from the Federal Reserve’s latest policy meeting suggested it could keep borrowing costs at record lows into next year.

Energy firms tracked a surge in oil prices as hopes for crude demand picked up and ongoing crises in the Middle East fanned supply worries.

The gains across assets come after a painful July-September quarter that saw trillions wiped off global markets owing to worries about the state of China’s economy and an expected US interest rate hike.

On Thursday, minutes from the Fed’s closely watched September policy board meeting showed some members were concerned about China’s struggles, the strong dollar and persistently low inflation.

“Recent global and financial market developments might restrain economic activity somewhat as a result of the higher level of the dollar and possible effects of slower economic growth in China and in a number of emerging market and commodity producing economies,” the minutes said.

Expectations through most of the year had been for the Fed to hike rates by 2016 as the world’s number two economy picks up pace.

However, with China suffering a growth slowdown — to levels not seen in a quarter of a century — and other developed and developing economies under pressure, policymakers have held off firing the gun.

The chances of a move were hammered in August when Beijing surprisingly devalued its yuan currency, fuelling worries about the Asian economic giant while last Friday’s below-par jobs data also struck a blow.

The minutes lit a fire under struggling emerging market currencies, with the ringgit surging 2.3 percent and rupiah more than three percent higher. The ringgit has soared about eight percent this week, its best five-day run in 17 years.

Talk of a Fed rate rise has hurt emerging markets — particularly struggling Malaysia and Indonesia — as dealers have for months been withdrawing cash to the United States looking for better, safer returns.

Energy firms climb

“The latest minutes clearly suggest that international factors are an unusually large determinant of US policy deliberations,” Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, wrote in an email to clients.

“This, combined with the weak September US nonfarm payrolls report indicate that the hurdle for a US rate hike has increased further, which was music to the ears of investors.”

The South Korean won climbed almost 1%, the Australian dollar was 0.12% higher, the Thai baht edged up 0.30% and the Taiwan dollar gained 1.0%.

Share markets also extended a run of gains as confidence returns to trading floors. Tokyo was up 0.78%  by lunch while Hong Kong rose 1.6% in the morning, Sydney added 0.81% and Singapore gained 1.3%.

Markets have been rallying for years on the back of loose monetary policies introduced by central banks during the global financial crisis and economists fear any tightening will cut off the money tap, halting a stuttering recovery and lead to another downturn.

Among the stand-out winners on equities markets were energy companies, made more attractive by the advance in crude prices.

Sydney-listed Santos surged more than 5% while in Hong Kong CNOOC was almost 7% higher and PetroChina added 4.5%. Inpex and JX Holdings in Tokyo also rallied.

Crude prices have seen advances in the past week, surging more than 10% to multi-month highs as worries about a stronger dollar, a supply glut and weak demand ease.

The market got a shot in the arm Thursday when the head of the OPEC cartel of crude producers — which represents almost half of output — said demand will rise more than projected this year.

On Friday, US benchmark West Texas Intermediate was up 0.50% and Brent was 0.53% higher, with continuing strife across the oil-rich Middle East providing support.

WASHINGTON – Two American women will on Friday become the first female soldiers to graduate from the elite and hugely demanding Ranger School, the US Army announced.

“Congratulations to all of our new Rangers. Each Ranger School graduate has shown the physical and mental toughness to successfully lead organizations at any level.

“This course has proven that every soldier, regardless of gender, can achieve his or her full potential,” Secretary of the Army John McHugh said Monday.

“We owe soldiers the opportunity to serve successfully in any position where they are qualified and capable, and we continue to look for ways to select, train, and retain the best soldiers to meet our nation’s needs,” he added.

Nineteen women began the rigorous training program in April but 17 were eliminated.

The Ranger School welcomed women for the first time this year, following President Barack Obama’s 2013 request that the Pentagon order all branches of the armed forces to open up ground combat jobs to women by 2016.

Women make up about 15 percent of army personnel.

Ranger School is an elite training program reserved for the most physically fit in the US Army, who feed into the 75th Ranger Regiment, an elite special operations force.

The progress of the two women has been closely monitored by the military community, where women in combat is still a divisive issue.

BAIKONUR (KAZAKHSTAN) – Astronauts from Russia, Japan and the United States Thursday docked successfully with the International Space Station under six hours after they launched, NASA television showed.

The Soyuz TMA 17M rocket — carrying cosmonaut Oleg Kononenko, US astronaut Kjell Lindgren and Kimiya Yui of Japan — had roared skyward from Russia’s Baikonur cosmodrome in the barren Kazakh steppe at 2102 GMT.

After a fly-around at around 350 meters (1,150 feet), the rocket manuevered to a rendezvous with the ISS, at 10:46 EST (0246 GMT Thursday).

“We have contact,” a NASA announcer said, as the craft soared high above the coast of Ecuador, 402 kilometres (250 miles) over the Pacific.

One solar array — a type of power supply that captures energy from the sun — did not deploy on time, but this did not affect the rocket’s flight as the others were still operating, the US space agency said.

Scientists and space enthusiasts around the world were watching the launch closely, and with some concern, since the mission had been delayed by two months because of a Russian rocket failure.

Russia was in May forced to put all space travel on hold after the unmanned Progress freighter taking cargo to the ISS crashed back to Earth in late April.

The doomed ship lost contact with Earth and burned up in the atmosphere. The failure, which Russia has blamed on a problem in a Soyuz rocket, also forced a group of astronauts to spend an extra month aboard the ISS.

A workhorse of space that dates back to the Cold War, the Soyuz is used for manned and unmanned flights.

Ahead of the liftoff, the three men met with 81-year-old cosmonaut Alexei Leonov, the first man to walk in space and one of the Apollo-Soyuz commanders.

Sending the first man into space in 1961 and launching the first sputnik satellite four years earlier are among key accomplishments of the Russian space program and remain a major source of national pride in the country.

But over the past few years, Russia has suffered several major setbacks, notably losing expensive satellites and unmanned supply ships to the ISS.