The fDi Magazine has published the Asian Cities of the Future 2009/10 list. Singapore tops the rankings followed by Tokyo and Shanghai.

The selection methodology:

“fDi Cities of the Future shortlists are created by the independent collection of data by fDi Benchmark across 133 Asia-Pacific cities. This information was set under six categories: economic potential, human resources, cost effectiveness, quality of life, infrastructure and business friendliness. A seventh category was added – FDI promotion strategy. In this category, 24 Asia-Pacific cities submitted details about their promotion strategies and this was assessed and scored by the independent judging panel.

Cities could score up to a maximum of 10 points for each individual criteria, which were weighted by importance to give the overall scores. Where data was available only at a national rather than city level, a lower weighting was generally applied.”

Hong Kong came in at 4th and Seoul was ranked the 5th. In addition to Shanghai the two other Chinese cities included in this list are Guangzhou and Beijing.

The credit rating agency Standard & Poors downgraded Greece’s credit rating today.Last week Fitch downgraded Greece’s rating. Both the agencies cut the credit rating due to the country’s huge debts. The public debt of Greece stands at $442B and its public deficit is about 13% of GDP.

In Debt Fears rattle Europe the Journal notes that the Euro tumbled to $1.4505 yesterday. Austria nationalized Hypo bank on ECB’ s orders and there are new fears that another Austrian lender may be in trouble as well. Hypo bank is the sixth largest bank in Austria and ran into trouble due to hidden losses from its exposure to Eastern Europe.

The European countries with huge budget deficits are Portugal, Ireland, Italy, Greece and Spain which are now dubbed as “PIIGS” by traders.

The External Debt of Greece stands at $552B at the end of Q2,2009 as the table shows below. The external debt rose a massive 481.87 % in 2008 due to wasteful spending by Greek politicians.Most of the money went to fund social spending and high wages paid to public workers many of whom were hired by politicians to show their gratitude for electing them.This is why Greece continues to be the poorest country in Europe and its credit rating
was downgraded.

Gross External Debt Position (in US$ millions)

[TABLE=255]

Source: The World Bank

Portugal, Ireland, Italy and Spain also have high external debt levels. Italy’s external debt increased by over 10% from the start of the year thru 2Q,2009.

Is there a strong correlation between high economic growth and strong investment returns?. A recent study of economic growth in 14 industrialized countries by Orbis, the global asset management partner of investment management firm Allan Gray of South Africa, proves that there is very little correlation between growth in real dividends per share over the 20th century and economic growth.

Chart – Real Dividend Growth Per Share and Economic Growth

Via Equinox.co.za

Many investors mistakenly believe that high-growth countries will deliver high investment returns. The study used real dividend growth per share instead of earnings since earnings are impacted by accounting changes over the years. Dividend growth is a good indicator of returns delivered to shareholders.

From the chart above, we can infer that Japan had an annual real GDP growth of 4.2% in the 20th century. But it had a negative dividend growth rate of 3.3% per year during the period. Italy, Belgium, France, Germany, Spain, the Netherlands, Switzerland and Ireland also had positive GDP growth but negative real dividend growth.

Even when the real GDP and dividend growth rates were going in the same direction, the differences between the two rates were too high.Canada, USA, the UK and Australia had this scenario.

Overall it is not the high-level economic or industry conditions that affect a company’s performance. Rather it is the competition and individual performance that determines a company’s financial success.

The above theory holds true when we look at the high growth economies of India, Brazil and China. Very people invest in the companies domiciled in these countries for their dividend growth. Similarly in the US, during the dot com era people invested for the overall GDP growth and a company’s earning growth rather the real dividend growth.