Australia Back In The Big League
Sydney Morning Herald
Saturday January 26, 2002
THE waters of Rushcutters Bay are thick with money. Row after row of boats sit bobbing at the Cruising Yacht Club with power names like Dominator, Brutus, Bonus, Foxy, Eagle One and French Kiss. Tom and Nicole kept Alibi moored here. At the adjacent d'Albora Marina, a brisk trade in Riviera cruisers is going on, and last weekend you could choose from a Riviera 36 ($349,000), a 46 ($385,000), a 4000 ($425,000). Someone even put a deposit on the big, thrusting Squadron 65 from Britain ($2,195,000).
``Sales are strong," says Owen Hasemer, of LDM, which sells new and used boats at the marina. ``We thought it would cool right down after the Olympics but it didn't. We can't get enough good second-hand boats. Second-hand boats are holding their prices. Our most popular boat is the Riviera 36 single cabin, which sells for $335,586 including GST." Riviera is now the biggest manufacturer in Queensland.
People are happy at Mercedes-Benz Australia, too.
``Sales of our passenger vehicles grew 26 per cent in calendar year 2001, to a new all-time record for us of 12,042 units," says Mercedes' spokesman, Toni Andreevski. ``It's the first time we've exceeded 10,000. It's quite remarkable growth when you consider that in the early 1990s we were selling between 2000 and 3000 cars a year in Australia."
Mercedes now ranks in the top 10 in vehicle sales in Australia. While it sells trucks, buses and light commercial vehicles, it is expensive cars that are driving the growth. Sales of top-end models increased by 173 per cent in 2001, far higher than the rest of the lines.
``The demand for top-end luxury items, including motor vehicles, is running extremely high," says Andreevski. ``People were concerned about the impact of the September 11 catastrophe, but after a brief lull in September, our sales in October, November and December were all up on the previous year."
The Mercedes AMG sports line, which starts at $140,000, had an ``exceptional" year. Mercedes' answer to the craze for Toorak Tractors, the M-class four-wheel drive, enjoyed a ``record year" at $65,900 despite strong competition from BMW, Lexus and Range Rover.
Global slowdown? September 11 inhibitions? Recession in the United States? Not here, mate. The Australian economy is, again, one of the world's most resilient despite a global economic slowdown. The stock market was the world's strongest in 2001. The real estate market ran hot in Sydney and Melbourne. (So much for the post-Olympics doldrums theory.) The global credit ratings police, Moody's Investors Services, and Standard & Poor, have both singled out Australia for praise in their global surveys and expect another solid performance from Australia this year. Interest rates are at their lowest levels in 30 years. Consumer confidence is strong. Employment is steady.
Despite September 11, despite America's recession, despite Australia's biggest trading partner, Japan, sliding back into stagnation, despite Australia's tourism industry hit by a plunge in international travel, Australia's stock market ended the year $56 billion bigger than it began, with a market capitalisation of $727 billion, the highest ever. In 2001, every major stock market in the world declined in US dollar terms, except Australia:
Australia +0.5 per cent
New York Stock Exchange -3.6
Spain -7.1
Germany -15.6
United Kingdom -16.6
Taiwan -18.2
Hong Kong -18.8
NASDAQ -19.1
Canada -20.1
Japan -24
Singapore -24.3
Italy -31.4
Switzerland -33.4
How many cruisers would be selling down at Rushcutters Bay if the Australian market had taken hits like those some markets have taken in the past year? It isn't just the solidity of Australia, it is the rapid renovation of the economy. Ten years ago this is what the Australian stock market looked like:
Mining and agriculture (37.7 per cent), manufacturing (36.5 per cent), finance/insurance (15.8 per cent), and services (10 per cent). Services includes tourism, education, Internet technology and gaming.
Three-quarters of the market's capitalisation was in traditional areas of mining, agriculture and manufacturing. Ten years later, the proportions are almost reversed, an extraordinary turnaround in a short time:
Mining and agriculture (14.1 per cent) and manufacturing companies (19.5 per cent) comprise just one third of market capitalisation while finance and insurance (36.7 per cent) and services (29.7 per cent) make up the rest.
Service companies now make up two-thirds of the value of the stock market. Australia has become an intellectually-based economy and Sydney a regional financial capital. Finance is the big growth area. Last year, according to Axiss Australia (an agency of the federal Treasury), 60 financial companies moved into Australia or expanded their presence, attracted by economic solidity, political stability, an educated workforce, good IT infrastructure and a strategic time zone for Asian markets. Employment in financial services has jumped by 60,000 in two years, or almost 20 per cent, to 357,000. The largest Australian corporations are in the fields of communications (Telstra), media (News Ltd) and finance (NAB). The biggest resource company, BHP, once known as the Big Australian, does not rank in the top three even after its huge merger with Billiton.
All of which leads to the happy news that Australia held up well in our annual survey of the world's 100 largest economic entities, a global list that has been running since 1999. The list seeks to place in perspective the size of the world's global corporate conglomerates by ranking stock markets alongside companies. They are measured by the one common denominator they all share market capitalisation in US dollars. It is an arbitrary construct, an annual snapshot distorted by short-term currency and stock market fluctuations. But as a tool for the big picture, it has served well as a measure of the gigantic flows of global capital and financial power.
Australia has done well. Despite the continued weakness of the Aussie dollar against the greenback, Australia moved up from 13th to 11th in 2001, and our market is now larger than any global corporation (for the time being). The list shows that even the largest and most valuable companies in the history of capitalism can be humbled. Two years ago, it took $US63 billion ($121 billion) to make the top 100. This year, it took $US46 billion. Even this relatively more modest scale is still 50 per cent larger than any company in Australia. The largest Australian companies do not come close to making the top 100. The highest ranking goes to Telstra, at 126. (Telstra's is valued at twice its current market capitalisation because only half the company's stock is trading on the stock market.) But two Australian companies, Telstra and News Ltd, do sneak into the top 100 global corporations, in market capitalisation.
The key word has been consolidation. Not only have giants corporations become even bigger by merging with each other, entire national stock markets are merging and forming alliances. Three of the world's biggest markets disappeared from the list this year: France (ranked 4th), Holland (10th) and Belgium (20th), replaced by a market called Euronext, operating out of exchanges in Paris, Amsterdam and Brussels. It is now the world's fourth-biggest stock market, displacing Germany.
Last year, there were 29 countries on the top 100 list, now there are 27.
Many middle-ranked economies have had a rough year. Scandinavia, once regarded as a model for Australia, had a disastrous time. Sweden ranked just behind Australia on the list a year ago with a market cap of $306 billion. A big gap has since opened up, with Australia at 11 and Sweden falling to 19 following a 29 per cent fall in market cap. The Swedish market has fallen 50 per cent from its all-time high and is now less than two-thirds the size of Australia's market. Finland, the high-tech wonder, has fared even worse. Its market value has plunged 62 per cent from its all-time high, losing 35 per cent of its value, in US dollar terms, last year. No surprise that the market value of Nokia, the company that changed Finland, has halved in two years.
Argentina, in two years, tumbled from 75th on the list, and a market capitalisation of $US80 billion, to 140th and a market cap of $US33.4 billion. Australia's biggest companies, News Ltd and Telstra, now have a higher market value than the entire Argentinian stock market.
South Africa was one of the world's top 20 stock markets a year ago, with a market value of $US218 billion. But with the rand becoming a basket case South Africa fell from 20th to 29th and its market value fell by 29 per cent to $US155 billion. Expect to see more South Africans moving to Australia.
For global corporations, the retreat has been general, although there have been some conspicuous exceptions. The success stories have been decidedly low-tech. Wal-Mart, the bargain department store chain that ate Main Street America, is unstoppable. It grew 21 per cent and $US42 billion in 2001, very much against the flow of negative momentum. Home Depot, the world's largest chain of home improvement stores, enjoyed 19 per cent growth. Pepsico got bigger by swallowing Quaker Oats, and moved up to 59th from 87th, adding $US35 billion in market value on the way. Kraft Foods roared into the list at 79th, with a market cap of $US58 billion after it was spun off from the Philip-Morris conglomerate (which retains control of Kraft). Kraft was one of the largest and most successful initial stock offerings in market history. Which all shows that in tough times, it pays to keep it cheap and simple and stick close to home.
Two years ago, the top 100 list proved to be a picture of the global market at the height of the new millenium high-tech bubble. Since then there has been a cascade of falling giants. The market value meltdowns, in order of greatest magnitude of loss: Yahoo! has become Arrrggghhhh! losing 91 per cent of its value and $US100 billion in the past two years; Nippon Telephone and Telegraph has fallen 81 per cent and lost more than anyone else in market value ($US222 billion); Nortel of Canada, also down 81 per cent (and $US135 billion); Deutsche Telekom, down 77 per cent ($US165 billion); France Telecom, down 66 per cent ($US89 billion).
The market meteor known as Lucent Technologies has fallen even faster than it rose, 86 per cent and $US150 billion, free-falling out of the list from 36 to 184. Other disasters have befallen Cisco Systems, Nokia, Worldcom/MCI, Dell Computer, LM Ericsson, Sun Microsystems, Hewlett-Packard, QUALCOMM, Intel, EMC and Motorola. Even Microsoft has been humbled, losing 32 per cent of market value, $US173 billion, and dropping out of the top 10 to 13th (and behind Australia). Telstra starts to look good in this casualty ward.
Eleven of these 16 tech giant companies have departed the top 100. In the process, these 16 have, collectively, lost $US2 trillion (four thousand billion Australian dollars) in market value over the past two years. That is more than five times the value of the entire Australian stock market. It is more than six times the size of Australia's gross domestic product.
It's a big, big world out there. Big and dangerous, with a worrying rise in
wealth disparities between rich and poor, a trend which includes Australia. But
Australia now has a globally competitive economy in a world ruled by survival of
the fittest.
The 100 largest economic entities Market capitalisation in US dollars, billions 1 USA..................................................13,956 2 JAPAN................................................ 2452 3 UK ......................................................2149 4 EURONEXT ........................................ 2070 5 GERMANY ........................................ 1072 6 CANADA ............................................ 615 7 SWITZERLAND.....................................527 8 ITALY ..................................................527 9 HONG KONG........................................506 10 SPAIN ............................................... 468 11 AUSTRALIA ..................................... 375 12 General Electric (US)........................ 374 13 Microsoft (US).................................. 343 14 TAIWAN ........................................... 293 15 Exxon Mobil (US).............................. 269 16 Wal-Mart (US)................................... 266 17 Pfizer (US)........................................ 258 18 Citigroup Inc (US).............................. 256 19 SWEDEN........................................... 237 20 Intel (US)........................................... 233 21 AIG (US)........................................... 202 22 SOUTH KOREA................................. 194 23 FINLAND........................................... 190 24 IBM (US)........................................... 186 25 BRAZIL............................................. 186 26 Johnson & Johnson (US)................. 178 27 BP (EUR).......................................... 169 28 GlaxoSmithKline (EUR)..................... 157 29 SOUTH AFRICA .............................. 155 30 Cisco (US)....................................... 154 31 Vodafone (EUR)............................... 141 32 AOL TimeW (US).............................. 139 33 Merck (US)....................................... 134 34 Verizon (US).................................... 134 35 SBC Comm (US)............................... 129 36 MEXICO............................................ 120 37 MALAYSIA ..................................... 119 38 Home Depot (US)............................. 118 39 SINGAPORE..................................... 116 40 Berkshire Hathaway (US)............... 113 41 Coca-Cola (US)................................ 111 42 Nokia (EUR)..................................... 108 43 HSBC (EUR)..................................... 107 44 Royal Dutch (EUR)........................... 103 45 Philip Morris (US)............................. 102 46 Procter & Gamble (US).................... 100 47 Bank of America (US) ...................... 98 48 TOTAL Fina Elf (EUR)........................ 98 49 Toyota (JAP)...................................... 96 50 Bristol-Myers (US)............................. 96 51 ChevronTexaco (US)......................... 94 52 DENMARK ......................................... 93 53 Oracle (US) ....................................... 93 54 Novartis (EUR)................................... 91 55 Tyco (US).......................................... 90 56 Eli Lilly (US)........................................ 86 57 GREECE............................................. 86 58 Abbott Labs (US).............................. 86 59 PepsiCo (US)..................................... 84 60 American Home (US)......................... 82 61 AstraZeneca (EUR)........................... 80 62 Wells Fargo (US) .............................. 80 63 Fannie Mae (US)................................ 77 64 J.P. Morgan Chase (US).................... 77 65 Dell Computer (US)............................ 76 66 IRELAND............................................ 75 67 BellSouth (US)................................... 73 68 Viacom (US)...................................... 69 69 NORWAY.......................................... 69 70 AT&T (US) ........................................ 67 71 Shell Trading (EUR)........................... 66 72 Morgan Stanley (US) ........................ 65 73 UBS (EUR) ........................................ 64 74 UPS (US) .......................................... 63 75 Telecom Italia (EUR).......................... 62 76 Taiwan Semiconductor .................... 61 77 Siemens (EUR).................................. 61 78 Amgen (US)...................................... 59 79 Medtronic (US)................................. 59 80 Kraft Foods (US).............................. 58 81 ISRAEL............................................. 58 82 China Mobile (HK)............................. 58 83 Telefonica (EUR).............................. 58 84 Allianz (EUR).................................... 57 85 CHILE .............................................. 56 86 Barclays (EUR) ............................... 56 87 Vivendi Universal (EUR).................. 55 88 Unilever (EUR)................................. 55 89 Aventis (EUR).................................. 54 90 Pharmacia (US)............................... 53 91 Eni (EUR)......................................... 53 92 Credit Suisse (EUR)........................ 52 93 Nippon T&T (JAP)............................ 52 94 Schering-Plough (US)...................... 51 95 Deutsche Telekom (EUR).................50 96 ING (EUR......................................... 50 97 American Express (US).................. 48 98 TURKEY ......................................... 47 99 Merrill Lynch (US)........................... 46 100 SAP (EUR).................................... 46 Sources: International Federation of Stock Markets and the Yahoo! Finance Stockscreener and Hoover's Stockscreener search engines.
© 2002 Sydney Morning Herald