Debt still haunts world economies

Economists predict that the world economy will still struggle as demand from European countries weakens due to a high level of debt.

South Africa’s Anil Thakersee, Portfolio Manager for Micro Strategy Investments for Old Mutual in that country, argues that most developed countries will not move out of the debt slump as quick, thus impacting on the consumers worldwide, including Namibia which is also a major exporting country.

Thakersee was giving an overview during a presentation focusing on Challenges and Opportunities for Real returns for 2012 and Beyond.

He spoke at the event alongside Namibia’s Floris Bergh, Portfolio Manager for the Old Mutual Investment Group.

Namibia’s export of raw material is driven by commodity prices and the country relies on that for revenue, but will be greatly affected by the high level of debt in the developed countries, it is argued.

Thakersee further pointed out that Europe will lurch from crisis to crisis, meaning that countries such as Greece and Portugal and others in that zone already have high levels of debt.

He also indicated for the 2012 the Chinese house prices will fall, while the United States of America will be expected to focus on politics.

The USA will go to the pools in November this year and politicians are expected to make promises to win votes in regard to the economy.

The economist also pointed out that the company earnings growth will slow and disappoint the expectations of analysts.

Companies which for example trade in the production of laptops, which is a luxury, will be affected as consumer would rather concentrate on buying needed goods instead of expensive items.

In his bid, Bergh said Old Mutual believes in a multifaceted approach to investments favouring fundamentals.

He said the way forward is to have a blended top-down bottom-up fundamental approach, while they will maintain the objective of a consistent long term wealth management strategy.

On Investments, Bergh, pointed out that securities that offer long term value, with a focus on safety and an understanding of liquidity will be looked at.

He added that in the long run, ‘entities with a superior model and track record, purchased at below fair value will reward the patient investor.’

In regard to risk management, Bergh countered that the company combines differing methodologies to manage risk in a portfolio context.

“This results in benefits of diversification, and an ability to optimise risk and return,” he said.

Reflecting on 2011, the two economists were in agreement that politics and natural disasters killed the recovery of the economy.

The Middle East politics led to higher oil price, while the European political situation translated into the current banking crisis.

At the same time, the two argue that the Politics in the United States led to a loss of confidence in the system from the consumers, while in Japan the tsunami had a great impact. For Australia and Thailand, the floods led to supply shocks.

click to enlarge ECONOMISTS: South Africa’s Anil Thakersee, Portfolio Manager for Micro Strategy Investments for Old Mutual (left) and Namibia’s Floris Bergh, Portfolio Manager for the Old Mutual Investment Group