Daily Management Review

HSBC: de-globalization of the world economy has started


08/07/2017


The volumes of foreign sales of large world companies are rapidly declining. Corporate income received abroad in 2016 slid to 44% worldwide, the lowest in 5 years, says HSBC.



pxhere.com
pxhere.com
HSBC analysts used indicators of the country's 29 largest stock indices to determine the amount of income of listed firms received abroad. Over the past couple of years, the share of these revenues has declined.

However, this does not apply to the sales volumes of German and Mexican companies. Last year, they experienced a jump in earnings received abroad.

Last year, Mexican companies received nearly half of their income abroad for the first time. The biggest part of these sales fell on the US, which contributed to a drop in the peso - dollar pair by 17% during the year. However, against Trump's aspirations to curb migration, as well as use measures to protect US trade, all this can quickly end. Moreover, the peso already increased by 16 per cent against the dollar in 2017, so Mexican companies will not receive the same growth in foreign sales this year.

Three-fourths of German companies' revenues come from foreign sales, relatively evenly distributed between the rest of America, Europe and Asia. As a rule, European firms are more open than their foreign counterparts, in part due to small domestic markets and more soft cross-border trade restrictions . On average, 47% of European corporate revenues come from abroad, compared to 30 per cent for firms in the US and 32% for companies located in emerging markets.

Last year, the sharp decline in foreign income in Singapore was mainly explained with changes in companies listed in the local stock index, HSBC said. Although Swiss business also noted a decrease in revenues from foreign sales, 83% of revenue still come from overseas sales. This is more than in any other country, says HSBC.

Falling revenue in the energy sector explained a slight drop in the volume of foreign sales in the UK, but analysts believe that British companies have not benefited greatly from the fall of the pound. In 2016, the pound dropped off 16% of its value against the American currency, after voters decided to vote to quit the European Union.

HSBC suggests that there are not so many "net exporters" in the UK, or companies with revenues coming from overseas sales, but the costs are rather incurred at home. Thus, while almost 60 per cent of British revenues are generated abroad, 50% of the firms' assets are located outside the UK, too, so the weak British currency did not increase exports as much as expected. This does not benefit the future of the UK outside the EU.

This year, the trend towards de-globalization may change or at least slow down, as HSBC expects the growth of world trade - the point of view that the WTO expects. Nevertheless, look at these figures with caution. Despite a 100-page report, HSBC says it's incredibly difficult to accurately calculate earnings abroad based on how companies report their earnings. Last year, the source of 13% of global revenues had to be classified as "miscellaneous". 

source: bloomberg.com






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