Image alt tag

Error!

X

There was a problem contacting the server. Please try after sometime.

Sorry, we are unable to process your request.

Error!

X

We're sorry, but the Insights and Intelligence Tool is temporarily unavailable

If this problem persists, or if you need immediate assistance, please contact Customer Service at 1-888-522-2388.

Error!

X

We're sorry, but the Literature Center checkout function is temporarily unavailable.

If this problem persists, or if you need immediate assistance, please contact Customer Service at 1-888-522-2388.

Tracked Funds

You have 0 funds on your mutual fund watch list.

Begin by selecting funds to create a personalized watch list.

(as of 12/05/2015)

Pending Orders

You have 0 items in your cart.

Subscribe and order forms, fact sheets, presentations, and other documents that can help advisers grow their business.

A verification Email Has Been Sent

Close

An email verification email has been sent to .
Follow the instructions to complete the email validation process.

I have not received my verification email

Check your SPAM mailbox and make sure that twelcome@lordabbett.com is allowed to send you mail.

I'm still having trouble

If you're still having trouble verifying your email address. feel free to contact us.

1-888-522-2388
clientservices@lordabbett.com


OK

We're sorry. We found no record of the email address you provided.

Close

Register For a LordAbbett.com Account
Using Your Email Address.

  • Registered Financial Advisors gain access to:
  • Our data mining tool, Insight & Intelligence
  • Best in-class practice management content
  • Educational events, videos and podcasts.
  • The Lord Abbett Review - Subscribe now!

Registered but Having Problems?

If you believe you are registered and are having problems verifying your email address, feel free to contact us.

1-888-522-2388 clientservices@lordabbett.com

Terms & Condition

X

These Terms of Use ("Terms of Use") are made between the undersigned user ("you") and Lord, Abbett & Co. ("we" or "us"). They become effective on the date that you electronically execute these Terms of Use ("Effective Date").

A. You are a successful financial consultant that markets securities, including the Lord Abbett Family of Funds;

B. We have developed the Lord Abbett Intelligence System (the "Intelligence System"), a state of the art information resource that we make available to a limited community of broker/dealers through the Internet at a secure Web site (the "LAIS Site"); and

C. We wish to provide access to the Intelligence System to you as an information tool responsive to the demands of your successful business pursuant to these Terms of Use. Accordingly, you and we, intending to be legally bound, hereby agree as follows:]

1. Overview. · Scope. These Terms of Use (which we may amend from time to time) govern your use of the Intelligence System. · Revisions; Changes. We may amend these Terms of Use at any time by posting amended Terms of Use ("Amended Terms of Use") on the LAIS Site. Any Amended Terms of Use will become effective immediately upon posting. Your use of the Intelligence System after any Amended Terms of Use become effective will be deemed to constitute your acceptance of those Amended Terms of Use.We may modify or discontinue the Intelligence System at any time, temporarily or permanently, with or without notice to you. Purpose of the Intelligence System. The Intelligence System is intended to be an information resource that you may use to contribute to your business research. The Intelligence System is for broker/dealer use only; it is not to be used with the public in oral, written or electronic form. The information on the Intelligence System and LAIS Site is for your information only and is neither the tax, legal or investment advice of Lord Abbett or its third-party sources nor their recommendation to purchase or sell any security.

2. Your Privileges. · Personal Use. Your use of the Intelligence System is a nontransferable privilege granted by us to you and that we may deny, suspend or revoke at any time, with or without cause or notice. · Access to and Use of the Intelligence System. The User ID and password (together, an "Access ID") issued by us to you (as subsequently changed by you from time to time) is for your exclusive access to and use of the Intelligence System. You will: (a) be responsible for the security and use of your Access ID, (b) not disclose your Access ID to anyone and (c) not permit anyone to use your Access ID. Any access or use of the Intelligence System through the use of your Access ID will be deemed to be your actions, for which you will be responsible. · Required Technology. You must provide, at your own cost and expense, the equipment and services necessary to access and use the Intelligence System. At any time, we may change the supporting technology and services necessary to use the Intelligence System. · Availability. We make no guarantee that you will be able to access the Intelligence System at any given time or that your access will be uninterrupted, error-free or free from unauthorized security breaches.

3. Rights in Data. Our use of information collected from you will be in accordance with our Privacy Policy posted on the LAIS Site. Our compliance with our Privacy Policy will survive any termination of these Terms of Use or of your use of the Intelligence System.

4. Your Conduct in the Use of the Intelligence System. You may access, search, view and store a personal copy of the information contained on the LAIS Site for your use as a broker/dealer. Any other use by you of the Intelligence System and the information contained on the LAIS Site these Terms of Use is strictly prohibited. Without limiting the preceding sentence, you will not: · Engage in or permit any reproduction, copying, translation, modification, adaptation, creation of derivative works from, distribution, transmission, transfer, republication, compilation or decompilation, reverse engineering, display, removal or deletion of the Intelligence System, any portion thereof, or any data, content or information provided by us or any of our third-party sources in any form, media or technology now existing or hereafter developed, that is not specifically authorized under these Terms of Use.

· Remove, obscure or alter any notice, disclaimer or other disclosure affixed to or contained within the Intelligence System, including any copyright notice, trademark and other proprietary rights notices and any legal notices regarding the data, content or information provided through the Intelligence System.

· Create a hyperlink to, frame or use framing techniques to enclose any information found anywhere on the LAIS Site without our express prior written consent.

· Impersonate any person, or falsely state or otherwise misrepresent his or her affiliation with any person in connection with any use of the Intelligence System.

· Breach or attempt to breach the security of the Intelligence System or any network, servers, data, or computers or other hardware relating to or used in connection with the Intelligence System; nor (b) use or distribute through the Intelligence System software or other tools or devices designed to interfere with or compromise the privacy, security or use of the Intelligence System by others or the operations or assets of any person.

· Violate any applicable law, including, without limitation, any state federal securities laws. 5. Your Representations and Warranties. You hereby represent and warrant to us, for our benefit, as of the time of these Terms of Use and for so long as you continue to use the Intelligence System, that (a) you are, and will continue to be, in compliance with these Terms of Use and any applicable laws and (b) you are authorized to provide to us the information we collect, as described in our Privacy Policy.

6. Disclaimer of Warranties.

· General Disclaimers.

THE INTELLIGENCE SYSTEM, THE LAIS SITE AND ALL DATA, INFORMATION AND CONTENT ON THE LAIS SITE ARE PROVIDED "AS IS" AND “AS AVAILABLE” AND WITHOUT ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND. WITHOUT LIMITING THE PRECEDING SENTENCE, LORD ABBETT, ITS AFFILIATES, AGENTS, THIRD-PARTY SUPPLIERS AND LICENSORS, AND THEIR RESPECTIVE EMPLOYEES, CONTRACTORS, DIRECTORS, OFFICERS AND SHAREHOLDERS (COLLECTIVELY, THE “LORD ABBETT GROUP”) EXPRESSLY DISCLAIM ALL WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING THE WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, AND NONINFRINGEMENT. YOU EXPRESSLY AGREE THAT YOUR USE OF THE LAIS SITE, THE INTELLIGENCE SYSTEM, AND THE DATA, INFORMATION AND CONTENT PRESENTED THERE ARE AT YOUR SOLE RISK AND THAT THE LORD ABBETT GROUP WILL NOT BE RESPONSIBLE FOR ANY (A) ERRORS OR INACCURACIES IN THE DATA, CONTENT AND INFORMATION ON THE LAIS SITE AND THE INTELLIGENCE SYSTEM OR (B) ANY TERMINATION, SUSPENSION, INTERRUPTION OF SERVICES, OR DELAYS IN THE OPERATION OF THE LAIS SITE OR THE INTELLIGENCE SYSTEM.

· Disclaimer Regarding Investment Research.

THE INTELLIGENCE SYSTEM INCORPORATES DATA, CONTENT AND INFORMATION FROM VARIOUS SOURCES THAT WE BELIEVE TO BE ACCURATE AND RELIABLE. HOWEVER, THE LORD ABBETT GROUP MAKES NO CLAIMS, REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY, TIMELINESS, COMPLETENESS OR TRUTHFULNESS OF SUCH DATA, CONTENT AND INFORMATION. YOU EXPRESSLY AGREE THAT YOU ARE RESPONSIBLE FOR INDEPENDENTLY VERIFYING YOUR INVESTMENT RESEARCH PRIOR TO FORMING YOUR INVESTMENT DECISIONS OR RENDERING INVESTMENT ADVICE. THE LORD ABBETT GROUP WILL NOT BE LIABLE FOR ANY INVESTMENT DECISION MADE BY YOU OR ANY OTHER PERSON BASED UPON THE DATA, CONTENT AND INFORMATION PROVIDED THROUGH THE INTELLIGENCE SYSTEM OR ON THE LAIS SITE.

· Survival.

THIS SECTION 6 SHALL SURVIVE ANY TERMINATION OF THESE TERMS OF USE OR YOUR USE OF THE INTELLIGENCE SYSTEM..

7. Limitations on Liability.

NONE OF THE MEMBERS OF THE LORD ABBETT GROUP WILL BE LIABLE TO YOU OR ANY OTHER PERSON FOR ANY DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, SPECIAL OR EXEMPLARY DAMAGES (INCLUDING LOSS OF PROFITS, LOSS OF USE, TRANSACTION LOSSES, OPPORTUNITY COSTS, LOSS OF DATA, OR INTERRUPTION OF BUSINESS) RESULTING FROM, ARISING OUT OF OR IN ANY WAY RELATING TO THE INTELLIGENCE SYSTEM, THE LAIS SITE OR YOUR USE THEREOF, EVEN IF THE LORD ABBETT GROUP HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS SECTION 7 WILL SURVIVE ANY TERMINATION OF THESE TERMS OF USE OR YOUR USE OF THE INTELLIGENCE SYSTEM.

8. Miscellaneous Provisions.

· Governing Law. This Agreement will governed by and construed in accordance with the laws of the State of New York, without giving effect to applicable conflicts of law principles.

THE UNIFORM COMPUTER INFORMATION TRANSACTIONS ACT OR ANY VERSION THEREOF, ADOPTED BY ANY STATE, IN ANY FORM ("UCITA") WILL NOT APPLY TO THESE TERMS OF USE. TO THE EXTENT THAT UCITA IS APPLICABLE, THE PARTIES HEREBY AGREE TO OPT OUT OF THE APPLICABILITY OF UCITA PURSUANT TO THE OPT-OUT PROVISION(S) CONTAINED THEREIN.

The Intelligence System is not intended to be used by consumers, nor are the consumer protection laws of any jurisdiction intended to apply to the Intelligence System. You agree to initiate and maintain any action, suit or proceeding relating to these Terms of Use or arising out of the use of the Intelligence System exclusively in the courts, state and federal, located in or having jurisdiction over New York County, New York.

YOU HEREBY CONSENT TO THE PERSONAL JURISDICTION AND VENUE OF THE COURTS, STATE AND FEDERAL, LOCATED IN OR HAVING JURISDICTION OVER NEW YORK COUNTY, NEW YORK. YOU AGREE THAT YOU WILL NOT OBJECT TO A PROCEEDING BROUGHT IN YOUR LOCAL JURISDICTION TO ENFORCE AN ORDER OR JUDGMENT OBTAINED IN NEW YORK.

· Relationship of Parties. The parties to these Terms of Use are independent contractors and nothing in these Terms of Use will be construed as creating an employment relationship, joint venture, partnership, agency or fiduciary relationship between the parties.

· Notice. All notices provided under these Terms of Use will be in writing and will be deemed effective: (a) when delivered personally, (b) when received by electronic delivery, (c) one business day after deposit with a commercial overnight carrier specifying next day delivery, with written verification of receipt, or (d) three business days after having been sent by registered or certified mail, return receipt requested. We will only accept notices from you in English and by conventional mail addressed to: General Counsel Lord, Abbett & Co. 90 Hudson Street Jersey City, N.J. 07302-3973 We may give you notice by conventional mail or electronic mail addressed to the last mail or electronic mail address transmitted by you to us.

· Third-Party Beneficiaries. The members of the Lord Abbett Group are third-party beneficiaries of the rights and benefits provided to us under these Terms of Use. You understand and agree that any right or benefit available to us or any member of the Lord Abbett Group hereunder will also be deemed to accrue to the benefit of, and may be exercised directly by, any member of the Lord Abbett Group to the extent applicable.

· Survival. This Section 8 will survive any termination of these Terms of Use or your use of the Intelligence System. The undersigned hereby signs these Terms of Use. By electronically signing and clicking "Accept" below, these Terms of Use will be legally binding on me. To sign these Terms of Use, confirm your full name and enter your User ID and Password (as your electronic signature) in the fields indicated below and click the “I Accept” button.

Reset Your Password

Financial Professionals*

Your password must be a minimum of characters.

Confirmation Message

Your LordAbbett.com password was successully updated. This page will be refreshed after 3 seconds.

OK

 

Economic Insights

Recent anxieties about China’s economy appear overdone. Growth may continue to slow as the world’s second largest economy adjusts, but it’s still respectable compared with anywhere else.

 

In Brief

  • Slowing growth in China still eclipses that of almost every major economy.
  • China is going through what all developing countries that succeed and become wealthy do, and started to transition toward a more domestically led, consumption-oriented economy years ago.  But it takes decades, and it’s very bumpy along the way.
  • The record of Asian economies that reach the level of 40% investment to gross domestic product (GDP) is one of painful transitions to their “new economies,” according to the International Monetary Fund (IMF). They learned that it is just not that easy to productively allocate such investment, not easy to do with debt, and not easy to transition away from it.
  • On the plus side, in 2013, China’s services sector started to consistently grow faster than the manufacturing sector, according to CEIC Data.

 

For all the market jitters about China’s slowing growth, rising debt, plunging stock markets, and sometimes sketchy communication, now is a good time to take a longer-term perspective. After all, China’s remains the world’s second largest economy, and its slowing growth is still much greater, for example, than that of the European Union, according to 2016 growth forecasts from the IMF.1 (See Chart 1.) 

 

Chart 1. China’s Slowing Growth Still Eclipses Most Countries
Major economies’ share of world GDP versus their 2016 growth forecasts

Source: Charles Schwab, International Monetary Fund; data as of January 23, 2016.
*Countries presented sum to 88.4% of world GDP; those that each make up less than 0.7% of world GDP are not displayed.

 

Understanding Limits to Growth and Moves to Consumer-led Economies
China is going through what all developing countries that succeed and become wealthy do.

The ruling party understands that over-reliance on exports and fixed asset investments to grow an economy has limits, and so, years ago, started the process to transition toward a more domestically led, consumption-oriented economy. But it takes decades, and it’s very bumpy along the way.  

Why are investors surprised? To answer this, it’s interesting to recall how the successful economies of Japan, Taiwan, and Korea developed over the last few decades and successfully transitioned to wealthy, consumer-led economies. Japan’s transition occurred in the 1970s–80s, Taiwan in the 1980s, and Korea followed in the 1990s. All of these economies began their transitions when their per-capita real GDP adjusted for purchasing power was approximately $8,500 per head. As these economies transitioned away from rapid investment and exports, their per-capita GDP in purchasing-power terms leveled out at between $10,000–10,500 per head.2 China is embarking on its transition at just about the same level of GDP per head as all the others. And since its policy approach looks realistic, let’s examine what they did to get to this point.

Fifteen years ago, China rushed to catch up with the rest of the developed world, but the Chinese did it their way—the centrally planned communist way, pumping so much money into a wide variety of industries that China’s double-digit growth eclipsed every nation in the world. 

Between 2000 and 2008, much of the fixed asset investment went into useful infrastructure and housing improvements. But as time went by, some investment was misallocated into less productive uses, particularly in terms of industrial plant expansion and state-owned enterprises. That trend of “mal-investment” worsened after the financial crisis of 2008–09, when the government provided huge stimulus to push growth back toward 10%. 

In 2011, then-premier Wen Jiabao announced that China’s next five-year plan would lower the target for annual GDP growth, to 7%, in order “to raise the quality and efficiency of economic growth.” The intent was a new growth pattern jointly driven by consumption, investment, and exports. That meant reducing the nation’s dependence on exports, lowering its current account surplus, encouraging strategic industries like biotechnology, advanced machinery, new information technology, new and renewable energy, and new materials; redistributing income to households; increasing minimum wages; expanding government-funded welfare; building more subsidized housing; boosting household consumption; promoting labor-intensive service industries; pension reforms; healthcare reform; and rebalancing regional economic integration plans. 

The result was artificially inflated growth driven by heavy use of leverage, which exacerbated bank credit issues. To what extent the government sweeps such problems under the carpet remains to be seen. But they were able to sustain that growth rate up through 2011–12.   

With China’s old model of economic growth running out of steam, China’s latest five-year plan (for 2016–20) under Premier Xi Jinping focuses on greater development of a consumption-driven, middle-income economy. Priorities include innovation as a primary driver of economic development and higher-quality growth; openness in both domestic and global markets; environmentally friendly economic growth; coordination to ensure balanced development among rural and urban areas, and across different industries; shared prosperity; and expanded social services.3

Once again, it’s useful to look at history to see what has happened to countries that have over-invested and tried to shift their economies to domestic consumption. Within the recent history of Asia, there have been only four economies that have broken through the 40% investment to GDP share4: China, Singapore, Malaysia, and Thailand. Singapore invested heavily in infrastructure to become a hub for shipping and light industrial manufacturing. Early on, this was a great success, as Singapore has become a world leader in a number of shipping and offshore industries. But it was not without pain, as inflation whittled away the nation’s productivity advantage. But as the country became wealthier, the government realized that financial services and consumer demand could supplant the roles of manufacturing and shipping in the economy, so officials reoriented the nation-state’s economic policy toward that end. The Asian debt crisis of the 1990s accelerated this transition as well. Malaysia and Thailand also spent heavily on fixed asset investments in housing, infrastructure, and manufacturing. Toward the end of their rapid growth in the 1990s, the debt-fueled investment also took a turn toward speculative “mal-investment”-type projects.  Both nations suffered heavily during the Asian debt crisis, and were forced to reorient their economies away from investments to consumption and exports. In each case, the transition away from fixed asset investment caused severe economic underperformance and difficulty. None have ever seen investment grow to that level again. (See Chart 2.)  

 

Chart 2. Can China Learn from Other Asian Countries’ Overinvestment?
Investment share of GDP in Asia, 1980–2011

Source: CEIC and Barclays. Data as of December 31, 2011.       

 

So, unfortunately, the record of Asian economies that reach the level of 40% investment/GDP is one of wrenching transitions to their “new economies.” One lesson from those troubled emerging markets was that it is just not that easy to productively allocate such investment, not easy to do with debt, and not easy to transition away from it.           

China, on the other hand, is unique as a command-and-control economy, whereby the Communist Party, ironically enough, is massively wealthy and owns many businesses. But the party knows the challenges and has studied the history. 

Among notable successes so far: In 2013, the services sector started to consistently grow faster than the manufacturing sector, which is what you what you would expect to see in an economy with increasing domestic wealth. (See  Chart 3.) With more than 640 million Internet users, China is making significant strides toward becoming a modern, information technology-dominated economy. And the nation’s growing appetite for goods and services bodes well, in the sense that they aren’t so different than most Western consumers.       

 

Chart 3. Services Eclipsed Manufacturing in China Several Years Ago
Growth components in China, 2009–15

Source: CEIC and CLSA. Data as of December 31, 2015.

 

But there are some unsettling factors that point to potential problems in this transition. 

Let’s look, for example, at Japan’s transition during the 1970s, when the country embarked on a move away from a mercantilist, low-valued-added manufacturing base into a wealthier, consumer-led economy.

Note that consumption was already running at a very high level, above 50%, and the transition boosted this a bit, and then stabilized it at that high level. Investments, which had been growing rapidly, were still only 30–35% of the economy, and that percentage shifted down gradually, to around 25%.

Now contrast that with China at present. Consumption, which was 50% back in the 1980s, before all the massive investment, is approaching a very low 30%—way below Japan’s 50%.  

Investment in China is significantly larger than the pre-transition Japanese economy, which slowed down investments, kept consumption flat, and saw its net trade grow. (See Chart 4.) China will have a hard time growing net trade, and officials need to lower investments and increase consumption. That’s a much harder trick to pull off, especially after some poor policy choices by the government in the last year (such as mistimed intervention into the Shanghai market to prop up stock prices). Further, the situation is exacerbated by the fact that global trade is weak and nominal GDP growth around the world has been falling. Had the transition started five years ago into the early cyclical recovery around the world, it may have been easier.

 

Chart 4. Consumption and Investment in China, 1980–2010
% of nominal GDP

Source: Bank of Japan. Data as of December 31, 2010.

 

All of which suggests that slower growth in China will be with us for a while, as the nation seeks to transition and deleverage. But the combination of an expanding middle class, greater consumption, and continued structural reforms should still offer opportunity for companies that are well positioned to profit from such a momentous transition. 

As the head of one major auto company put it at the recent World Economic Forum in Davos, Switzerland, China is still pure opportunity. “I recognize the fact that China is not growing at the base that it used to grow, but this is part of the normalization of China,” he said. Chief executive officers of other multinationals echoed his long-term commitment to doing business in China. 5

“Some of the recent adjustments [such as the way the most recent renminbi depreciation was communicated] were not ideal,” said Richard Yetsenga, head of ANZ Research in Sydney, Australia. But Yetsenga believes investors have been “excessively bearish” on China. “China is feeling its way, and a bit of patience is called for,” he added.6

 

1 Elena Holodny, “How Much Each of the World’s Big Economies Matter to Global Growth?” businessinsider.com, January 26. 2016.
2 Gross domestic product (GDP) is the most commonly used single measure of a country's overall economic activity. It represents the total value of final goods and services produced within a country during a specified time period, such as one year. GDP per capita based on purchasing power parity (PPP). PPP GDP is gross domestic product converted to international dollars using purchasing power parity rates.  Purchasing power parity is a theory which relates changes in the nominal exchange rate between two countries’ currencies to changes in the countries' price levels. The purchasing power parity theory predicts that an increase in a currency's domestic purchasing power will be associated with a proportional currency appreciation, and that a decrease will be associated with a proportional currency depreciation.
3 James McGregor, “The 13th Five-Year Plan: Xi Jinping Reiterates His Vision for China,” APCO Worldwide, apcoworldwide.com, November 13, 2015.
4 Investment/GDP refers to the share of investment in total production. It is obtained by calculating gross capital formation as percentage of gross domestic product.  From a policy standpoint, that is relevant because investment provides a stimulus to economic development, and the rate of investment reflects the infusion of requisite capital to support or accelerate the development process. But economists worry that overinvestment, particularly in non-productive assets, can have dire consequences.
5 Jacqueline Simmons, Matt Campbell, Phil Serafino, “China's Promise Has Renault, Cisco Seeing Beyond Plunging Market,” Bloomberg, January 22, 2016.
6 Tom Mitchell and Gabriel Wildau, “China’s Economic Leaders Struggle to Explain Thinking to World,” Financial Times, January 27, 2016.

 

Risks to Consider: Investing in international securities generally poses greater risk than investing in domestic securities, including greater price fluctuations and higher transaction costs. Special risks are inherent to international investing, including those related to currency fluctuations and foreign, political, and economic events. The securities markets of emerging countries tend to be less liquid, especially subject to greater price volatility, have a smaller market capitalization, have less government regulation and may not be subject to as extensive and frequent accounting, financial and other reporting requirements as securities issued in more developed countries. Further, investing in the securities of issuers located in certain emerging countries may present a greater risk of loss resulting from problems in security registration and custody or substantial economic or political disruptions. No investing strategy can overcome all market volatility or guarantee future results.

Statements concerning financial market trends are based on current market conditions, which will fluctuate. All economic and performance information is historical and does not guarantee future results.

RELATED TOPICS

ABOUT THE AUTHOR

Lord Abbett's Blog

videoOur blog, The Investment Conversation, features timely commentary and analysis from Lord Abbett experts. Join the conversation.

Please confirm your literature shipping address

Please review the address information below and make any necessary changes.

All literature orders will be shipped to the address that you enter below. This information can be edited at any time.

Current Literature Shipping Address

* Required field