Home Investment THE ESSENCE OF THE GLOBAL ECONOMY

THE ESSENCE OF THE GLOBAL ECONOMY

by Forbes Andorra

THE ESSENCE OF THE GLOBAL ECONOMY

Trade brings prosperity and allows countries and regions to flourish. His thriving companies are always a hot tip for investors.

Free trade creates prosperity – and prosperity creates peace. This has been proven historically not only by the Golden Age in England (under Elizabeth I) or that of Holland, both in the early modern period, but also by the peace order of the EU. However, how fragile trade flows have become has been shown not least by the supply chain problems of recent years. European industry is substantially dependent on imports of raw materials and intermediate goods from China. The global dependence on companies has increased immensely and could become even worse in the future.

In 2022, EU countries exported goods worth a total of €456.5 billion to the USA, corresponding to 15.9% of all exports. €209 billion went to China, corresponding to 7.3% of exports. The USA is therefore the most important export market for the EU-27, with China in third place behind the United Kingdom. The most important import country for the EU-27 is China with €512.1 billion in imported goods, followed by the USA in second place with €327 billion.

In extreme cases, the geopolitical and security policy tensions between China and the USA could lead to a global separation into two hostile economic blocs. In such a scenario, there would be a risk of a serious loss of global prosperity, according to a study by Prognos AG on behalf of VBW Bayern. The study examines three different deglobalization scenarios and their economic effects on the countries of the European Union.

Imports would fall by 17% if there was no longer any trade between Europe and China or the rest of Asia. The effects would be dramatic, because the “Chinese bloc” in the EU alone is responsible for around €200 billion in exported added value, which corresponds to around 2.6 million jobs. That would correspond to a doubling of unemployment in the EU.

The EU has intensive connections with the USA and the American-dominated bloc, especially in terms of international investment and research relationships as well as exports. This block is of central importance as an international research location, also for European companies. The USA is a leader, particularly in the area of ​​digital technologies — a departure would cut Europe off from an important part of the world’s top research; That would be fatal, the study authors are sure. In the third scenario, the EU remains “non-aligned” and trade is only suspended with the USA and China. However, the economic weight of the two countries is so great that even in the neutral scenario there is a risk of serious consequences for Europe: gross value added alone would fall by around a fifth.

The close trade policy links mean that the European countries are each other’s most important partners. But the fact is that the basic business model of internationalization must be adhered to, according to the study, because the combination of deglobalization and protectionism would result in significant economic losses. To put it more simply: If trade comes to a standstill, there is a risk of loss of prosperity.

One of the big beneficiaries of international trade is the US giant Amazon. The global online mail order company was founded in 1994 by the computer scientist Jeff Bezos and originally specialized in shipping books. You can now buy just about everything on the platform, which had sales of $514 billion last year, from laptops to cell phones and laundry detergent. Amazon’s success has made Bezos one of the richest men on the planet (even after his expensive divorce from his wife MacKenzie Scott, who built the company with him).

The shares of the online retailer, which earned heavily during the Corona crisis, have increased by around 50% in the last year and were trading at more than €130 at the time of going to press. Analysts are betting heavily on Amazon: The major Swiss bank UBS has left the rating for Amazon at “Buy” (with a price target of US$ 178) – the group has surprised positively and is on track with its targeted increases in profitability, according to the UBS experts . The Canadian bank RBC’s vote was even stronger: it rated the company “Outperform” and a price target of US$180.

One retailer that only serves online business on the side, but successfully, is the Hornbach hardware store chain. It operates 169 hardware stores and garden centers as well as online shops in Germany, Austria, Switzerland, the Czech Republic, Slovakia, Romania, France, Luxembourg, Sweden and the Netherlands, generating sales of almost €6.3 billion in the 2022/23 financial year . The roots of the company, with more than 20,000 employees and headquarters in Bornheim, Palatinate, go back to 1877.

The Hornbach Holding share price hovers around €60 and has weakened due to corona. This year, however, the stock rose again — and the financial world sees a lot of potential in the Palatinate company: The analysis house Warburg Research has left the rating for Hornbach Holding at “Buy” (with a price target of €98) based on quarterly figures. After weaker sales development in the first quarter of the business, like-for-like sales increased slightly in the second quarter, say analysts. Achieving this price target would unlock profit potential of more than 60%.

Auto 1 Group SE was only founded in 2012 and is already very successful. According to its own information, it is Europe’s largest used car dealer. Because when you sold a used car for your grandmother you only received dubious and unacceptable offers, Hakan Koç and Christian Bertermann decided to digitize the used car trade.

With legal headquarters in Munich and administrative headquarters in Berlin, more than 6,000 employees generate sales of €6.5 billion. The Auto 1 Group has been listed on the stock exchange since February 2021, with a price of just under €7 at the time of going to press.

The car dealer is currently still making losses, and the title has lost around 19% over the last three years. In the meantime, however, there are signs of a turnaround at the company under the leadership of co-founder Christian Bertermann: The US bank has set JPMorgan Auto 1 to “Overweight” (with a price target of €9.70) — the online used car dealer has surprisingly performed well, the strong profitability should cause the consensus estimates for operating earnings (Ebitda) to rise slightly, say US analysts.

RBC finds even more “oomph” and gives it a thumbs up with a rating of “Outperform” and a price target of a whopping €20; The adjusted operating result of the online used car dealer reached break-even in the third quarter. The analysis bases its vote on the fact that the merchant segment Auto1.com performed below average, while the retail segment Autohero performed better than expected in terms of unit numbers and sales.

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