What 2015 means for the future
• “Greece represents a tiny fraction of the global debt crisis.” • “Japan is living on borrowed time.” • “ISIS is intent on accelerating its campaign of terror.” • “SA equity funds failed to outperform their benchmarks.”
In his welcoming address at the Momentum Investment Summit held in Cape Town on 12 November, Kevin Hinton, head of investment distribution at Momentum Distribution Services, reflected on the health of the global economy in 2015 and its potential effect on the future.
Hinton referred to “The World in 2015”, The Economist's annual collection of predictions of key events, issues and trends that will shape the year.
Hinton said: “Many of the Economist’s predictions were accurate, particularly that crises happen, so 2015 would be marked by volatility. The forecast was for continued muted worldwide inflation and an economically precarious Eurozone.”
For many, Greece is the poster child for the demise of the Eurozone’s economy. The International Monetary Fund (IMF) estimates Greece’s third bailout package at roughly $14.7 billion in the next two years. This follows two previous bailouts from the Eurozone and the IMF of $147 billion and $187 billion respectively.
“Greece represents a tiny fraction of the global debt crisis. Worldwide, countries have never been in so much debt. Wealthy countries cannot continue to bail them all out given their own extreme debt levels. US national debt has more than doubled since 2007 and will probably never be paid off”, warned Hinton.
In its outlook for Asia’s economy in 2015, The Economist predicted that the slowdown in China is far from over, while Japan is living on borrowed time.
“These predictions will remain true for the next two to three years, as China’s growth performance is almost certain to deteriorate because of the overhang of its real estate bubble, massive manufacturing overcapacity and the lack of new growth engines”, said Hinton.
Data from Bloomberg shows debt levels in China are at an all-time high. Likewise, Japan’s debt to gross domestic product ratio is now so excessive that an implosion seems imminent.
“The global economy is in crisis, with the nation-wide debt crisis threatening to spin out of control. Adding to the world’s woes are the twin political crises of the ISIS trail of terror and the influx of Syrian refugees into Europe”, said Hinton.
Hinton pointed out that the US?led campaign against ISIS, known as Operation Inherent Resolve, has launched more than 6 000 airstrikes against ISIS and is killing about 1 000 militants every month, roughly the same number of new ISIS members recruited every month. This leaves ISIS’s manpower strength effectively capped at 30 000 to 40 000, yet ISIS remains intent on accelerating its campaign of terror.
Hinton said about nine million Syrians have fled their homes since the outbreak of civil war in 2011, taking refuge in neighbouring countries or within Syria itself.
“The Eurozone is reeling under the pressure of accommodating some 150 000 Syrians, who have asked for asylum in the EU. Member states have pledged to resettle a further 33 000 Syrians, with the vast majority, about 28 500, to settle in Germany”, said Hinton.
“Dealing with these two crises will put added pressure on developed economies as they gear up to defend themselves and retaliate against ISIS terrorism, while offering social welfare to refugees”, added Hinton.
On investment, The Economist alluded to opportunities in emerging markets, but predicted that things are changing and investors can no longer bank on equities.
Hinton said: “2015 was a difficult year for SA investors. Almost all US dollar-based investments stagnated and about 90% of SA equity funds failed to outperform their benchmarks over five years. Exposure to property and bonds proved better investments than equities.”
Following his opening remarks, the conference speakers included leaders and experts who spoke on a range of industry topics spanning the investment industry. These included the following speakers:
• Mmusi Maimane, Federal and Parliamentary Leader of the official opposition in the National Assembly
• Dr. Martyn Davies, managing director of Emerging Markets and Africa at Frontier Advisory Deloitt
• Rachelle Best, associate director and regulatory change lead at PricewaterhouseCoopers
• Darren Zaman, chief executive officer of Brooks Macdonald International, based in Jersey, Channel Islands
The following companies participated in the panel discussions, chaired by Alec Hogg from Biznew.com:
• 36ONE Asset Management
• Allan Gray
• Coreshares
• Fairtree Capital
• GinsGlobal Index Funds
• Northstar Asset Management
• Perpetua Investment Management
• Satrix
• Tantalum Capital
