BusinessDay TV

2021-10-08 13:30:33

8 Oct 2021 @ 13h30 - North West University

Professor Raymond Parsons professor at the NWU School of Business & Governance and a Special Policy Advisor to Business Unity South Africa joined a panel discussion on the issue of value investments and shipping costs

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perspective weekend perspective watch here on business this week energy chickens have to roost as come home the trade offs of transitioning to a greener economy were laid bare way various the energy markets have reacted a century nearly half two since the organisation of petroleum exporting countries opec imposed and america all embarking on turning a modest inflation protracted problem into a bout of soaring prices and economic misery but the stagflation of the nineteen seventies is back certainly on economist mind today globally they confront as strengthening inflation inflation and disappointing and disappointing economic activity economic and the voices of unsettling warning echoes with the past are influential ones as well including summers the likes of larry and kenneth robo from harvard university mohammed and al area and cambridge university and previously open co one the world's managers biggest bond fund or put things into perspective i joined now by nesa am nair senior portfolio at sasfin manager securities woven passes professor in the school of business and governance at north university west and dr myriam open mint director of old advisory services professor and professor practice of for our of practice for our university at the of johannesburg welcome old off its nelson kick us been something of a volatile in equity week markets what stands out for you my game it was a change i think it was from what we've seen in the last few weeks you'll remember that value started investors peeping out of the woodwork because traditionally the unlike sectors sectors that didn't quite recover post covid-19 i'm talking about the financial shares the retail stocks property stocks have a very good performance in the last two months but and three this week they bucked seem to have that trend in favour of the stocks momentum funnily enough the resource shares kick back quite a lot especially yesterday the platinum price up four percent it's not surprising the planned platinum stocks were star performers yesterday but also the diversified miners have a good run course you course of oil mentioned oil you mentioned energy plays any particular the fossil place fuel energy we spoke about thungela earlier the week and on that stock it over bucks this a hundred is well and of was also course it naspers and prosus on the back of tencent's performance the previous day that a five saw percent increase yesterday so lots volatility of but you know i think the momentum trumped value during the course of this and week you mentioned you mentioned platinum the platinum the counters bouncing back there had been back held just over the last couple of months because of chip shortages myriam on this point to bring un it's one of those issues in the global economy they've through really lay bare the pandemic how supply exposed chains have been and protect particularly chips here so i reported this week since you are talking a week about where i vehicle exporters about they sort they about salt percent mass thirty percent mass thirty and of the vehicle i've been speaking to some manufacturers nathan saying a business i for a number of reasons but that around partly the world the shortage chaps so comic around the world are are struggling is rising demand and for other uses of chips but the reality is that time the square will shortage this is so mutual cabal supply constraints it's not just in it oil story now is generally you know the logistics issues and and just generally not keeping us up with absolutely and that feeds into this picture inflationary that we are seeing around the world is not just energy it's key show points on components in modern manufacturing in technology seeing shipping we costs are going through the roof raymond with oil spiking and inflation all of this worry with global growth strong post dp drought the big bump base a lot of that effects on the pandemic is stagflation real concern our are we returning turning the nineteen seventies back to we'll michael i i think think it's it's often often said said that that of of course course if you at history look it does not repeat itself matiti just by by some kind i think of analogy and that's important fought lines nineteen seventies of the in the world economy were different to what very they are now don't so i think we must assume that stagflation clear is and present danger in the world economy what one can say however is world economy that the is coming off growth a very high rate isn't at the moment that that of experiencing a lot of a what lot we're in terms of bottlenecks are opposed or pandemic a result of what we experience with with our supply chains and so forth and on the inflation side there's still debate my economist a big whether what we're experiencing now is transitory or whether it become embedded and i think that's and quite important to understand for us i think if we assess the risks the risks had to at i ido drink the moment the world is facing stagnation but certain countries like that that's why possible depending on what they do what is important so i think for us now say is to look a a a been red flag has raised i think we must be alert to these trends but at the moment not it's ons next weaken normalise what has been happening in terms of underpinning the world and economy certain of of the national economies the moment at the the growth outlook for world still looks the very very positive positive pretty good pretty good and now now of the international and none organisations have really lowered their forecasts for this year and next year have to we'll keep an eye on the myriam what's situation your take on the stagflation because issue there are some parallels at food if we look energy prices in particular ja sell so firstly the big growth spread as opposed comfort of course bounce back shouldn't see so where we that necessary there's a structural thing it's it's more of a bounce back from foreign growth growth last last year year following how and and we we have have to see it plays out over the next of years couple now the first thing is to know that let's speak other others may with me but disagree the real oil price about was the same in nineteen is today ninety as it if you look at it adjusted inflation rate in rome terms locally are we talking talking about dollar reserve is measured dollars yoyo in you wouldn't do it in rand because rand the rand rand already already depreciating as as it is is a a depreciating currency so so you would always always nokia you would book added in dollars you look at an and if inflation adjusted rate it's than actually were wasn't nineteen ninety and been spending around it's up and down twenty since march twenty between i if it in the if you put current dollars between around twenty-five dollar and eighty-two is which is about where it now and it's been standing up down and so so is there a slogan rise continuous in oil prices i think the jury still out on our is turner according be following demand to for oil over time i think that is the expectation so the the gas counselling kind of period the nineteen seventies were is a period that is step being step by phased out just just remembering oil connection or connection the anyway anyway know that i don't we would go into a cars stagflation by oil prices in that the same way happened in in the nineteen seventies is where that globally it does differ i mentioned the rand oil price because sitting i do think historically locally at record high rand prices oil with the rand around fifteen to dollar that the is raising concerns about inflation the in south african context already in an environment where growth our is growth is tapered as tapered it as is it is rand ie title academy in rand terms used that neutral from many thanks word and the wide whilst question is around volatile and depreciating and that even is to be honest mass necessarily about paying because the rand was overvalued long for so and it wasn't reflecting of exports the real value etcetera so attitude high non an analyst would have to dollar terms look at it in absolutely now the conversation we can get into that michael power has raised as recently recently as as well well on on the the show show about about not we whether or structural need to be looking at our unemployment differently through the exchange rate if you look at because the bangladesh example tyco for we are looking at low and semi skilled labour we are double the minimum wage of the bangladesh tucker so we are slightly more expensive southeast asia where cheaper europe i don't but direction want to take it in that just yet i want to back to equity bring it markets lesson means and what this a stagflation environment if it were happen and that is still a big jury is out if the as we've just discussed would that what mean for equities because generally inflation is good for equities generally it it will be good it for equities think stagflation but i don't necessarily is going think what to be i is we need to look at it if you're looking at micro level look you at the consumers the average south african consumers wallet and that's where inflation i think the basket can we spend the african in average south spending spending a fortune in in in transport cost of which fuel costs both of are linked to south the oil price in africa and i think that's the challenge listening to the debate exactly what dr is saying you myriam know the in the oil real terms price hasn't really gone i up but think in the context of south african consumer we tend to look spend money at what people on and yes they on transport spend money they spend money on food and foremost it's first almost spend money spend and money read and went and money on then they spend things like cell phones and and and and others were consumers especially consumer products and i think the fear markets for the equity is if the percentage of that wallet percentage spend increases towards the likes of fuel transport and food costs it leaves less a lot of everything else line because at the top erode peoples people's salaries are growing fast as as is the fuel price are roaming just start to conclude the conversation around stagflation because there's so so many more things happening this week but if we do that agree that we're not going run of to see a we the nineteen seventies type stagflation that and this inflationary spike is relatively transitory to and millions point as well price that the oil in in terms hasn't really risen levels to that are unprecedented certainly what next the global for economy what are you be keeping an eye going to out on considering there is that still so much noise in system due to the pandemic the and effects the base that that's created like basic having heard what what my colleagues have said only build i can on that say once again one would be very one careful dealing with that one is a new set of circumstances although there may be maybe familiar a familiar a challenge to called stagflation it's taking place been very difficult or and new fault lines the world economy in i also the point want to make to bring our our our discussion down to a basis that they may an asymmetrical be outcome in other words we may be talking globally here but at the end of the day one or two countries may may drift into stagflation others may not so i i think think we've we've got to to as as got i either think it has been that the said jury is still out what's so important for south africa is to ensure it's down that economic house is in order that so it has the necessary adapt ability flexibility and to deal with whatever changes challenges or new might emerge on the global front that certain leads and us into what bank governor lesetja the reserve kganyago was saying week earlier this we're going to have going to to have to there leave winter it sandton there we just have leave to it a quick break taker take we'll putting the week under the microscope putting things into perspective myriam with dr element raymond persons and lessen