The rise of the global South, the strengthening of platforms such as BRICS, and the record-high price of Gold, are manifestations of some of the longer-term changes in the global financial system. According to Ray Dalio, we are in a changing world order, where understanding some of these tectonic shifts is critical for our investment decisions.
While the US maintains a technological, economic and political dominance of the global world order, we think there is a steady rise of the global South. Favourable demographics, increase in intra-regional trade and economic growth momentum in countries such as India, Indonesia, Korea and Saudi Arabia, following the two decades of economic outperformance of China, are leading to a slight shift in the global economic center of gravity. Furthermore, we think the use of economic sanctions as a political tool by the US is accelerating this shift. 28% of the world economy is currently under US sanctions.
These changes support the case for a structural bull run in gold. The policy implication for countries like Pakistan is to strengthen regional trade ties. We think the recent focus on trade with Central Asia and the Middle East, along the CPEC trade route would be a beneficial strategy. Diversification of the foreign exchange reserves would also help hedge against any volatility in the US dollar. We think Africa will emerge as the key swing market over the next twenty years and will increasingly become the next focus area for developing trade routes and consumer markets.
For more details on our views, please read the attached report written by Mohsin Ali and S.M. Abbas from KTrade team.
