Posted: 2008-12-15 23:50 The markets  Presenter: Giulietta Talevi Guest(s): Lavan Gopaul - Click here to listen to the interview Summit TV takes a look at Monday on the markets with Lavan Gopaul from Cortex Securities Giulietta Talevi: Lavan, the resources did quite well on Monday - the interesting thing is that was on the back of a rally in platinum shares, one stock in particular Aquarius Platinum rising as much as 12% on the news that it’s going to shut its Everest Mine for six months and retrench most of its workers. One would have thought that’s bad news - but I guess the market thinks it’s not going to be losing money so “let’s pile in”? Lavan Gopaul: Platinum shares in general have been oversold in these past few weeks - certainly that downward spiral of the platinum price hurting a number of counters, and forcing quite a few of the conglomerates to start justifying their job card. Unfortunately the loss of jobs at Aquarius and the closing of some of their operations probably means they don’t lose as much money the market now comfortable to say they’re going to be buying into these shares after they’ve been sold so badly… Giulietta Talevi: I suppose supply will actually decrease as a result - less platinum coming into the market - so we could see the platinum price rallying quite nicely today… Lavan Gopaul: There is a school of thought that agrees that lower output may assist the platinum price higher. Unfortunately platinum has been under pressure because of a genuine lack of demand from industry - a combination of forces, with certainly the car manufacturers going through quite a bit of strain having meant that they’re likely to consume less platinum. Giulietta Talevi: One event today - you can make predictions and drum up your outlook and forecasts, but you can’t predict an event like Bernard Madoff basically swindling $50billion from clients across the globe - what do you make of that story? Do you think it’s going to have more repercussions, or are we seeing the worst of it? Lavan Gopaul: It certainly is a sad outcome for somebody that’s spent a career trying to develop his reputation and provide good investment advice over the years… Giulietta Talevi: To develop a stealing technique? Lavan Gopaul: Unfortunately as the head count of losses now grows it is likely possibly over the next 12 months you may see even more scandals come out as companies try and hide losses - we’ve seen a number of problems within the financial sector, it’s likely the problems could start to spill over into the industrial companies as well… Giulietta Talevi: Talking about our industrials that index was down 0.5% where the rest of the index looked fairly positive or was dragging us lower… Lavan Gopaul: You’ve seen a number of uncertain trades today - in particular players bracing themselves for the December holiday period - so direction not really counting. Some of the construction companies were coming under pressure again as investors define the assets and order books these companies have. In particular the big industrial news today was the MTN BEE deal that’s been reshaped for next year - certainly what they’re talking about now is a net of 5% to 6% of MTN as a whole. It refers to previous BEE deals - which after you take a loan portion or a debt portion out of the picture leaves you with about a net R4billion on that portion of the business. Into the new phase of BEE some of those old faces do come back into the picture… Giulietta Talevi: Moving from MTN the bond market did very well on Monday down 26 points - what is driving the bonds so much stronger? Is that ahead of Wednesday’s inflation data? Lavan Gopaul: I think it certainly is accounting for the inflation statistics we are expecting, as well as a number of players counting on a significant dip in inflation in 2009 - as we’ve previously discussed the computation of that data now having to be re-worked as the formula is adjusted. Also, some players still quite confident that the decision last week may spell out further interest rate cuts through next year, and a lot of bond investors or speculators quite happy to register their confidence. Giulietta Talevi: Talking about interest rate cuts the US Federal Reserve Federal Open Market Committee (FOMC) interest rate decision is on Tuesday when our market will be closed. They’re sitting at 1% - do you think they’re going to cut 50 basis points or might it be a slightly narrower cut that the US market is looking at? Lavan Gopaul: A number of player’s consensus is 50 basis points while some analysts say as much as 75 basis points. It’s a very dramatic situation to be in where base interest rates are this low - any cuts from here create a very dangerous position. It leaves only one direction - in time to come the US will not be able to use interest rates beyond this point as a tool, and then players can only look at interest rate increases. A number of international players are now deciding on whether to use US treasuries as the yield can only possibly dip now, and then go up making a bad capital investment… Giulietta Talevi: We are closed on Tuesday but open on Wednesday - will the direction our market takes depend on what happens on Wall Street on Tuesday evening? Lavan Gopaul: The US interest rate decision will certainly impact world markets - our cue will certainly be coming through from that dollar price affecting commodities, also we’ve got a lot of action with futures close out and inflation data on our dance card. www.summit.co.za Transcripts: 082 962 2772 mvr/met Comments Related to this transcript: Comment on this transcript... Name : Email : Comments :