A prominent New Zealand businessman’s regular reports on the global economy.

by The REJIGIT Blog

John Ryder, M.Com (Hons); CA; CMA, is a well known New Zealand Company Director, Investment Analyst, Property Investor and Writer etc. He is the author of “Global Investing: A Guide for New Zealanders”, published in 2016 by David Bateman Ltd (ISBN : 9781869539375).

He was one of the two founding directors of Ryman Healthcare Ltd and his present numerous company directorships include Executive Chairman of Qestral Corporation Ltd, Chairman of NZ King Salmon Ltd and Director of Tuatara Tours NZ Ltd.

Mini Global is reproduced verbatim and with the consent of the author and will be updated by Rejigit as further Mini Global reports become available.

The Global format below contains shortened descriptions of financial, investment, political and coronavirus issues, so as to make for easier initial reading. For an expanded version please go to www.globalnews.co.nz

18 October 2021

We discuss the reasons behind the difference between Covid-19 cases and fatalities in the EU (low) and the UK (high).

Drug company Merck has submitted an application to the US health authorities (the FDA) to approve a Covid-19 anti-viral pill, which could be used at home and reduces the risk of hospitalisation, or death.

Covid-19 cases in the US are falling, raising hopes that the country is finally making its way out of the pandemic, after 710,000 Americans have lost their lives from the virus.

The US share market was buoyant last week, storming home following better-than-expected earnings results from many large companies. However, the question overhanging equities is whether earnings growth can continue with the same trajectory currently being experienced.

Hedge funds have been quietly scooping up the shares of unloved oil and gas companies discarded by environmentally minded institutional investors, and are now reaping big gains as energy prices surge.

We discuss the Russell 2000, an index that measures the performance of 2000 small US companies and is considered a bellwether of the economy.

Rising inflation is triggering anxiety around the world, as a surge in demand following the easing of Covid-19 lockdowns has been confronted by supply bottlenecks and rising prices of energy and raw materials. As a result - of the 38 central banks tracked by the Bank for International Settlements, 13 have raised their key rate at least once.

While many believe that price increases are temporary, a growing number are concerned that the current economic environment is similar to the early 1970’s - which had a period of “stagflation” (stagnant economy, higher inflation).

According to the Food and Agricultural Organisation (FAO) of the United Nations, food prices are currently higher than they have been at any time in the last 10 years.

The US Federal Reserve will soon start to unwind its quantitative easing process, due to rising inflation, low unemployment and a buoyant economy. However, so far the bond market is not convinced that inflation is here to stay… while the former US Treasury Secretary Larry Summers believes they are behind the ballgame in reacting to increasing signs of permanently high inflation in the economy.

China is the world’s largest manufacturing country, with 29% of global output… and its factories currently have a major problem with controlling costs, which threaten to push up inflation around the world.

Bitcoin has surged to 5-month highs - following comments from the Chairmen of the Securities and Exchange Commission and the Federal Reserve that they would not be seeking a ban on cryptocurrencies.

The global economy is caught in a perfect storm. GDP is slowing, due to global supply disruptions, the energy crisis and ongoing fallout from the Covid-19 pandemic.

Economists are taking notice of data indicating that the US economy has passed its peak and is slowing.

The EU economy is being severely disrupted by global supply chain bottlenecks, leading to a 1.6% fall in manufacturing production across the 19 countries in the Eurozone in August.

The International Monetary Fund (IMF) has revised down estimates for China’s economic growth this year… on the back of a “stronger-than-anticipated” pullback in government spending and the fallout from the property market debacle.

The NZ economy rose by 2.8% in the second quarter ending 30 June, while unemployment fell to 4%, an 18 months low.

Analysts believe there is immense potential for fintech companies to capture large swaths of the banking industry.

The UK is struggling with Brexit, as Boris Johnson tries to rewrite the treaty.

The US is concerned that its economy is vulnerable to a shortage of essential minerals and has drawn up a list of those they want to foster and protect (“the essential minerals supply chain”).

Oil prices have continued to rise amid upbeat demand projections and curtailing of supply from the Oil and Petroleum Exporting Countries (OPEC) cartel.

Uranium - the price of which reached eight-year highs in September - is seeing renewed interest from investors, because of the ongoing energy crisis in Europe and Asia.

The Chinese property crisis continues to expand, with yet another large developer missing bond payments.

Westpac is forecasting that the Sydney residential property market will be unhindered by the Covid-19 lockdown and rise by 27% this year. However they expect the momentum to slow considerably in 2022.

In NZ, Quotable Value (QV) has said the average value of homes increased by 3.6% in the three months to September, up slightly from the 3.3% quarterly growth recorded in August. Queenstown and Christchurch recorded the highest rates of growth for the quarter.

It is what it is.

Take care out there.

Kind regards,

John Ryder and Devon Ashby