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Page 1: Snow White

Copyright © 2011. Calamander Capital Singapore Pte Ltd. All rights reserved.

Snow White

Money, Oil & PoliticsGlobal Economic Outlook Q1, 2011

Roman ScottManaging Director, Calamander Capital

Economic SpokesmanBritish Chamber of Commerce Singapore

Sponsored by

20th January 2011Theatre, Tanglin Club

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-4

-2

0

2

4

6

8

10

12

14

16

-4

-3

-2

-1

0

1

2

3

4

5

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

F

2011

F

Advanced Economies GDP Growth(% change y-o-y)

4.0%

2.4%

2

The Canary in the Coal Mine

Singapore GDP Growth(% change y-o-y)

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The Canary in the Coal Mine

-12-8-4048

121620

2002

2003

2004

2005

2006

2007

2008

2009

2010

Investment Spend% (y-o-y)

-40

-20

0

20

40

60

80

No

v-08

Jan

-09

Mar

-09

May

-09

Jul-

09

Sep

-09

No

v-09

Jan

-10

Mar

-10

May

-10

Jul-

10

Sep

-10

No

v-10

Industrial Production% (y-o-y)

-12-606

121824

2002

2003

2004

2005

2006

2007

2008

2009

2010

Exports% (y-o-y)

-10-6-226

10141822

1Q-0

8

2Q-0

8

3Q-0

8

4Q-0

8

1Q-0

9

2Q-0

9

3Q-0

9

4Q-0

9

Financial Services% (y-o-y)

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Global Economy

-2

-1

0

1

2

3

4

5

6

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

F

20

11

F

Source: IMF

Annual change (%)World GDP FY 2011 Forecast

4.22% (IMF)3.3% (World Bank & HSBC)

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OECD Leading Economic Indicators

-15

-10

-5

0

5

10

15

20

25

30

No

v-0

0

No

v-0

1

No

v-0

2

No

v-0

3

No

v-0

4

No

v-0

5

No

v-06

No

v-0

7

No

v-0

8

No

v-0

9

No

v-1

0

UK US China Euro area OECD Total

Global leading indicators12-month rate of change of the trend restored Composite Leading Indicators

11.5%

2.7%1.3%-0.6%-3.6%

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6

6

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US KPIs

UnemploymentRate

Business Spending

Corporate Earnings

GDP

Retail Sales

Business Confidence

Consumer Price Index

Inventories

+0.5% (m-o-m) Dec’10

Consumer Confidence

-0.4% (m-o-m)to 9.4% (Dec’10)

Fed Fund Rate

Manufacturing

-3.3%(m-o-m) to

Dec10(ConferenceBoard Index) 0.25%

+0.6% (m-o-m)Dec’10

led to +6.9%(y-o-y), largest

since 1999

+2.6% (q-o-q)

for Q3’10

+26% to

USD 1.64 Tn(y-o-y)

in Q3’10

+0.2% (m-o-m)Nov’10

+4.9%(m-o-m)Oct’10

+0.7% (m-o-m)

Nov’10 for manufacturing

orders

+0.7% to 57pts

(m-o-m) in Dec’10

(ISM PMI)

Leading Economic Index

+1.5%(m-o-m) in

Dec10

Current Account Deficit

+3.2% to USD 127.2 Bn

or -3.4% of GDP 2010

Q3’10

Consumer Expenditure

+3.9% (q-o-q)Q3’10

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Retail Sales

+5.4% (m-o-m)Dec’10

+5 % (m-o-m)Dec’10

+3.2% (y-o-y)Dec’10

+15% (y-o-y)Dec’10

+11.8 % (y-o-y)Dec’10

+8.4 % (y-o-y)Dec’10

+1.5 % (y-o-y)Dec’10

+10.4 % (y-o-y)Dec’10

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Tech

+71% (y-o-y) to

USD 6 Bn

+48% (y-o-y) to

USD 3.4 Bn

+9% (y-o-y) to

USD 5.3 Bn

Profit Growth in Q4’10

9

Page 11: Snow White

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Manufacturing – Sales Growth

7.5% (y-o-y)

to 224,185 unitsin Dec’10

16% (y-o-y)

to 100,702 unitsin Dec’10

6.7% (y-o-y)

to 190,976 unitsin Dec’10

574 planes sold after cancellation

worth of USD 74 Bn in 2010

510 deliveries

USD 39.9 Bn of total revenue

530 planes sold after cancellations

worth of USD 49 Bn.

462 deliveries

61 orders worth of GBP 3.2 Bn

of its Trent 900 engines with British Airways

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Source: US BEA

80

90

100

110

120

130

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

118%

% o

f D

isp

osa

ble

Inco

me

US Household Debt

0

1

2

3

4

5

6

7

8

19

91

19

92

19

93

1994

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

2003

20

04

20

05

20

06

20

07

20

08

20

09

20

10

% o

f D

isp

osa

ble

Inco

me

6%

US Personal Savings Rate

US Household Debt

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Auto Industry Signals the ‘The New Normal’

9

11

13

15

17

19

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

No. of new car sales (in mil)

11.6 mil

2.8

3

3.2

3.4

3.6

3.8

4

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

No. of new car sales (in mil)

2.9 mil1.5

2.0

2.5

3.0

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

No. of new car sales (in mil)

2 mil

0

4

8

12

16

20

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

No. of new car sales (in mil)

18 mil

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0

50

100

150

200

250

No

v-63

No

v-64

No

v-65

No

v-66

No

v-67

No

v-68

No

v-69

No

v-70

No

v-71

No

v-72

No

v-73

No

v-74

No

v-75

No

v-76

No

v-77

No

v-78

No

v-79

No

v-80

No

v-81

No

v-82

No

v-83

No

v-84

No

v-85

No

v-86

No

v-87

No

v-88

No

v-89

No

v-90

No

v-91

No

v-92

No

v-93

No

v-94

No

v-95

No

v-96

No

v-97

No

v-98

No

v-99

No

v-00

No

v-01

No

v-02

No

v-03

No

v-04

No

v-05

No

v-06

No

v-07

No

v-08

No

v-09

No

v-10

HousingM

on

thly

Nu

mb

er o

f H

ou

sin

g U

nit

s (i

n t

ho

usa

nd

s)

21

4140

Avg: 57

Avg: 119

Avg: 126

Nov-10

Building Permits

Housing Sales

Housing Starts

14

Page 16: Snow White

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US politics

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3.9% (Q3’10) 0.64%

5.2% (Oct’10)7.5% (Dec’10)6.7% (Oct’10)

Un-employment

Rate

Consumer Expenditure

Investment Spending

Corporate Earnings

Industrial Production

Retail SalesManufacturi

ngConsumer Confidence

GDP:I:

CPI:C/A balance (% of GDP):Unemployment:

-0.3% (Q4’09)0.64%

1.6% (Mar’10)-1.9% (Oct’10) 10.1% (Feb’10)

1.9% (Q3’10) 1.0%

2.2% (Dec’10) -0.5% (Oct’10)9.8% (Nov’10)

+1.4%(m-o-m)Nov’10

-0.8 %(m-o-m)Nov’10

0.2% (Q3’10) 0.5%

2.3% (Nov’10)-4.6% (Oct’10)

20.6% (Nov’10)

+0.3%(q-o-q) Q3’10

+6.9% (y-o-y) Oct’10

+3.3% to

57.1pts(m-o-m) Dec’10

10.1% (m-o-m)Oct’10

-0.5%(m-o-m)Nov’10

+0.1% (q-o-q)Q3’10

1.1% (Q3’10)0.72%

1.9% (Dec’10)-3.5% (Oct’10)8.6% (Oct’10)

EU KPIs

Business Confidence

-15% to -11 ptsDec’10

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UK KPIs

UnemploymentRate

Business Spending

Corporate Earnings

GDP

Retail Sales

Business Confidence

Consumer Price Index

Inventories

+3.7% (y-o-y) or 1.0% (m-o-m)

Dec’10

Consumer Confidence

+0.1% (q-o-q) to 7.9%Dec’10

Key Policy Interest Rate

Manufacturing

+18% to 53 pts(m-o-m) Dec’10 0.5%

+0.7%(m-o-m) Dec’10

0.7% (Q4’10)

lower than 0.8% (Q3’10)

+11.6% (q-o-q)Q2’10

+ GBP 0.3 BnQ4’10

-15.7%(q-o-q)3Q’10

+11.9% (y-o-y)Q3’10

+1.4% to 58.3pts(m-o-m)Dec’10

Leading Economic Index

+19.7%(m-o-m) in

Dec10

Current Account Deficit

+85% to GBP 9.6 Bn

-2.6% of GDP 2010

(Q3’10)

Consumer Expenditure

-0.4% (q-o-q)Q4’10

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UK Austerity

3.4

6.8

6.4

7.8

8.7

8.2

3.1

8.2

5.9

8

6.3

33.1

1.6

1

2

3

4

5

6

7

8

9

2000

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

2010

F

20

11

F

20

12

F

20

13

F

Government Real SpendingAnnual Growth

% change (y-o-y)Health8%

Pensions8%

Welfare7%

Education6%

Remainder16%

Private Spending

55%

UK Total GDP 2010

TOTAL UK GDP 2010 USD 2,352 Bn

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1,341 Bn

1,216 Bn

49 Mil

23 Mil 5 Mil

7 Mil

235 Mil

88 Mil

62 Mil

20 Mil

China/India

10%

GDP 2010

9.5%

GDP 2010

6.1%

GDP 2010

9.6%

GDP 2010

7%

GDP 2010

14.8%

GDP 2010

6%

GDP 2010

68 Mil

6.8%

GDP 2010

7%

GDP 2010

8%

GDP 2010

GDP 2010

1.7%

GDP 2010

AGEs Canarys Asean-3 References

Emerging Markets Asia

Population

20

Page 22: Snow White

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My worry - Asian inflation…the watchlist

4.8

5.9

-0.7

3.3

-1

0

1

2

3

4

5

6

2007

2008

2009

20

10

F

% change (y-o-y)

6.4

8.3

10.911.8

6

7

8

9

10

11

12

2007

2008

2009

20

10

F

% change (y-o-y)

6.4

10.2

4.8

5.14

5

6

7

8

9

10

11

2007

2008

2009

2010

F

% change (y-o-y)

8.3

23

7.19

9.9

6

10

14

18

22

26

2007

2008

2009

2010

F

2011

F

% change (y-o-y)

2.2

5.5

-0.8

3.3

-1

0

1

2

3

4

5

6

2007

2008

2009

20

10

F

% change (y-o-y)

2.1

6.6

0.6

2.8

0

1

2

3

4

5

6

7

2007

2008

2009

2010

F

% change (y-o-y)

0.44%

6.5%

5%

2.75%(lending 5.81%)

9%

2.25%

InflationPolicy rate

21

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20

30

40

50

60

70

80

90

100

110

120

130

140

Jan

-07

Feb

-07

Mar

-07

Ap

r-07

May

-07

Jun

-07

Jul-

07A

ug-

07Se

p-0

7O

ct-0

7N

ov-

07

De

c-0

7Ja

n-0

8Fe

b-0

8M

ar-0

8A

pr-

08M

ay-0

8Ju

n-0

8Ju

l-08

Au

g-08

Sep

-08

Oct

-08

No

v-0

8D

ec-

08

Jan

-09

Feb

-09

Mar

-09

Ap

r-09

May

-09

Jun

-09

Jul-

09A

ug-

09Se

p-0

9O

ct-0

9N

ov-

09

Dec

-09

Jan

-10

Feb

-10

Mar

-10

Ap

r-10

May

-10

Jun

-10

Jul-

10A

ug-

10Se

p-1

0O

ct-1

0N

ov-

10

De

c-1

0

Oil Price

Inflation part 2……Oil

Increase in Imported Bill in 2010

USD 70 Bn

USD 72 Bn

USD 27 Bn

34 Other Rich Countries

USD 790 Bn

USD per barrel

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Oil Price: 100 USD/Barrel

20 Jan 2011

Page 24: Snow White

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Bonds: Hasta La Vista, Baby!

0

1

2

3

4

5

3m

6m

12

m 2y

3y 5y 7y

10

y

30

y

Dec'09

Jan'11

0

1

2

3

4

5

3m

6m

12

m 2y 3y 5y

7y

10

y

30

y

0

1

2

3

4

5

3m

6m

12

m 2y 3y 5y

7y

10

y

30

y

Government Securities’ Yield Curves

Yield (%) Yield (%) Yield (%)

Maturity Period

Maturity Period

Maturity Period

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World Bond

(Citigroup)

World(MSCI) (BSE) (SET)

(STI)(SSEA)(FTSE100)

(RTS)(NIKKEI 225)

(SPTSX)

(DJIA) (SMI) (KOSPI)

(KLSE)

(JSX)

(TAIEX) (All Ord.)

(CAC 40)

(DAX)

(BOVESPA)(FTSE Euro 100)

(CSEALL)

24

11

3

13

22

-12

9

-9

8 811

9

29

15

-11

30

22

52

38

46

20

610

-20

-10

0

10

20

30

40

50

60

Wor

ld (M

SCI)

Wor

ld B

ond

U.S

.

Cana

da

Euro UK

Fran

ce

Ger

man

y

Swis

s

Japa

n

Braz

il

Russ

ia

Indi

a

Ch

ina

(S

SE

A)

Kore

a (K

ospi

)

Sing

apor

e

Thai

land

Mal

aysi

a (F

TSE)

Indo

nes

ia

Taiw

an

Sri L

anka

Aust

ralia

YTD (%)From 31 Dec 2009 to 12-Jan-11

Equities: performance for 2010

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60

70

80

90

100

110

120

130

140

150

Jan

-73

Jan

-74

Jan

-75

Jan

-76

Jan

-77

Jan

-78

Jan

-79

Jan

-80

Jan

-81

Jan

-82

Jan

-83

Jan

-84

Jan

-85

Jan

-86

Jan

-87

Jan

-88

Jan

-89

Jan

-90

Jan

-91

Jan

-92

Jan

-93

Jan

-94

Jan

-95

Jan

-96

Jan

-97

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

USD Against Major CurrenciesWeighted Average of the Foreign Exchange Values of the

USD

(Mar 1973 = 100)

Note: Nominal Major Currencies Index of USD against a basket of EUR, CAD, JPY, GBP, CHF, AUD, and SKR.

Calamander’s 1st warning of USD decrease at BritCham Sep’02

25

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Commodities 2010

Index(Dec09 = 100)

80

100

120

140

160

180

200

220

Dec

-09

Jan

-10

Feb

-10

Mar

-10

Ap

r-1

0

May

-10

Jun

-10

Jul-

10

Au

g-1

0

Sep

-10

Oct

-10

No

v-1

0

Dec

-10

Copper

+24%

Rubber

+69%

+74%

Palladium

Platinum

+18%

+66%

Silver

Coal

+38%

Uranium

+36%

Iron Ore

+80%

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Soft Commodities 2010

60

80

100

120

140

160

180

200

220

Dec

-09

Jan

-10

Feb

-10

Mar

-10

Ap

r-1

0

May

-10

Jun

-10

Jul-

10

Au

g-1

0

Sep

-10

Oct

-10

No

v-1

0

Dec

-10

Cotton

+119%

Wheat

+28%

Beef

+35%

Soya bean

+11%Pork

+20%

Index(Dec09 = 100)

Sunflower Oil

+29%

Coffee

+52%

+26%

Barley

+25%

Sugar

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LKR 4,411Bn or USD 39.6 Bn+2.1%27.5%

USD 1.7 Bn5.2%

3.3% (Q2’09)

GDPGDP growth (Q2 ‘09)IFX ReservesCPI (end of period)Unemployment

Population Growth

Population<25 yrs

GDP Per Capita Income

0.6%20 mil

44%or 8.8 mil

USD 1,983

18.2% (of GDP) or

LKR 803 Bn

43% (of GDP)LKR 1930 Bn

Exports ImportsBudget Balance

20% (of GDP)

34.4% (of GDP)

-9.3% (of GDP)

Sri Lanka, Q2 2009

1,500

2,000

2,500

3,000

3,500

Jan

-09

Feb

-09

Mar

-09

Ap

r-09

May

-09

Jun

-09

Jul-

09

Au

g-09

Sep

-09

Oct

-09

No

v-09

Colombo stock exchange price index (LKR)

4

6

-2

4

6 56

87

6

3

5

6 6 5 5

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

F

2011

F

2012

F

2013

F

2014

F

Sri Lanka annual GDP growth (%)

Gross External Debt

Gross National Savings

+86% (YTD)

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Sri Lanka: Was one of the World Fastest Growth Economies Despite Conflict

14.8

10.0

9.2

8.0

7.9

7.8

7.0

6.7

6.0

3.2

4.7

10.5

8.5

6.0

3.0

3.6

3.9

7.3

5.6

3.8

- 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0

Singapore

China

India

Sri Lanka

Thailand

Brazil

Hong Kong

Vietnam

Indonesia

Russia

Average GDP Growth Rates (2004 - 2009) 2010F

GDP Growth 2004-2009

29

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....And All Flying On One Engine

Western45%

Southern11%

North Western

10%

Central10%

Sabaraga-muwa 6%

Uva5%

North Central5%

Eastern5%

Northern3%

30

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-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

20

10

F

20

11

F

20

12

F

20

13

F

20

14

F

20

15

F

GDP Per Capita (USD)

Sri Lanka: No Longer Low Income – Well Above India and Viet Nam

GDP per capita FY 2010: USD 2,365

31

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Sri Lanka, Q4 2010

1,500

2,500

3,500

4,500

5,500

6,500

7,500

8,500

Jan

-09

Feb

-09

Ma

r-0

9

Ap

r-09

May

-09

Jun

-09

Jul-

09

Au

g-09

Sep

-09

Oct

-09

No

v-09

Dec

-09

Jan

-10

Feb

-10

Ma

r-1

0

Ap

r-10

May

-10

Jun

-10

Jul-

10

Au

g-10

Sep

-10

Oct

-10

No

v-10

Dec

-10

Jan

-11

Colombo stock exchange price index (LKR)

+96% FY 2010

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A Well Structured Economy – Better Than China and Viet Nam

Services40%

Industry 49%

Agriculture

11%

China

Services60%

Industry 28%

Agriculture

12%

Sri Lanka

Services63%

Industry 20%

Agriculture

19%

India

Total GDP FY 2010 USD 4.9 Tn USD 48 BnUSD 1.5 Tn

33

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Sri Lanka: Consumption Driven Service Sector

Transport, 18%

Domestic Trade, 18%

Import Trade, 18%

Banking & Insurance, 15%

Public Administration & Defence, 13%

Export Trade, 7%

Real Estate, Renting & Business Services, 5%

Community & Other Services, 4%

Post & Telecommunication , 3%

Hotel & Restaurants, 1%

Cargo-handling Ports and Civil Aviation, 1%

34

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Sri Lanka: Investor Friendly Policies

All sectors open to FDI, equal treatment of local and foreign investors

100% foreign equity allowed, except local banks

Can repatriate royalties, franchise fees, capital, profits, dividends

Attractive tax / tariff incentives package, no capital gains

Foreign investors can own 100% title to land and buildings

Substantial reduction in customs duties and taxes (June 2010)

Trade Liberalization: EU & US, India and Pakistan FTA’s

Upgrade of Sovereign Ratings by Fitch and S&P (BBB, BB+)

35

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LKR:USD 2004-2009 Going Forward

97.0000

102.0000

107.0000

112.0000

117.0000

122.0000

127.0000

132.0000

Jan

-04

May

-04

Sep

-04

Jan

-05

May

-05

Sep

-05

Jan

-06

May

-06

Sep

-06

Jan

-07

May

-07

Sep

-07

Jan

-08

May

-08

Sep

-08

Jan

-09

May

-09

09F 10F 11F 12F 13F

regression

EIU

BMI

Citibank

JP Morgan

SCB

HSBC

JKSB

CC

LKR 112.7

36

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Sri Lanka: Infrastructure Projects of Note

~100 km

Hambantota

Ratnapura

Monaragala

Batticaloa

Amparai

MataraGalle

BoosaRuhunu

Oluvil Port

Kandy

Puttalam

Badulla

Dambulla

Anuradhapura

Trincomalee

Jaffna

Point Pedro

•Reconstruction of approximately 120,000 houses in the North and East

Colombo- MataraExpressway -128km

Colombo

Target of 17 flyovers in Colombo & Suburbs

KatunayakeColombo- Katunayake Expressway - 25km

Katunayake-AnuradhapuraExpressway - 200km

500 MW Coal Power Plant, Trincomallee

Jaffna Water Supply Scheme

Oluvil PortDevelopment

Hambantota Port Development

Galle Port Development

900 MW NoorchcholaiCoal Power Plant

Colombo PortDevelopment

Upper Kotmale Hydro Power Plant - 150 MW Hydro

Maththala International AirportDevelopment

rehabilitation of roads: 857km national highways, 1099km rural roads and 8450km of feeder roads

37

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Risks Remain

1. 2008 recovery prognosis remains: slow, fragile, easy money fueled, ‘jobless’, won’t return to old ‘normal’

2. Risk of serious G3 macro events remain in Eurozone - PIGS crisis part 2

3. Fiscal support, even in US, over, politically untenable

4. Risk that Fed overshoots when tightening starts –a delicate balancing act

5. Housing not out of the woods yet

6. EM risks a repeat of the 2008 inflation scare if don’t let currencies appreciate

7. US government hits statutory debt ceiling in Spring.

Copyright © 2011. Calamander Capital Singapore Pte Ltd. All rights reserved. 39

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Climate change

Rio de Janeiro, Brazil702 death as of 20 Jan 2011Damaged cost: est. USD 500 Mil

Sri Lanka32 killed as of 20 Jan 2011Damaged cost: RS 50 Bn

Queensland, New South Wales, Victoria, & Tasmania, Australia

20 death as of 20 Jan 2011Damaged cost: est. AUD 7 Bn

South Africa40 death as of 20 Jan 2011

Damaged cost: est. USD 51 Mil

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alternative investments in the world’s fastest growing markets

Roman ScottManaging Director, Calamander CapitalEmail: [email protected]: www.calamandergroup.com