Anything is possible? 10 outrageous market predictions for 2021

Danish bank Saxo Bank has compiled its annual list of 10 Outrageous Predictions for 2021. (AFP)
Danish bank Saxo Bank has compiled its annual list of 10 Outrageous Predictions for 2021. (AFP)
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Updated 01 January 2021

Anything is possible? 10 outrageous market predictions for 2021

Danish bank Saxo Bank has compiled its annual list of 10 Outrageous Predictions for 2021. (AFP)
  • Some unlikely and outlandish business predictions for 2021

DUBAI: Danish bank Saxo Bank has compiled its annual list of 10 Outrageous Predictions for 2021. The predictions focus on a series of unlikely but underappreciated events which, if they were to occur, could send shockwaves across global financial markets.

1. Amazon “buys” Cyprus

2021 sees Amazon and other online monopoly and infotech giants casting an increasingly wary eye on governments looking to take them down a notch for having become too powerful, and for paying very low tax rates.

These companies have long employed an army of lobbyists, with some of them even taking up quasi-governmental approaches to the situation. Take Microsoft, which has launched a United Nations representation office in New York and hired a diplomat to run European government affairs. At the same time, Facebook has even established a “Supreme Court” to oversee user complaints and other issues.

In 2021, as the heat from official quarters rises, Amazon makes its move, redomiciling its EU headquarters to Cyprus. The country welcomes the giant corporation and the tax revenue that will help it reduce its debt-to-GDP ratio of nearly 100 percent. Amazon consultants “help” Cyprus to rewrite its tax code to mimic Ireland’s, but with even lower levels of corporate and other taxes, with the country’s leaders and its population happily in its thrall from the financial windfall and lower tax rates.

2. Germany bails out France

France is one of the European countries facing the highest wall of debt in the coming years. Before the COVID-19 pandemic outbreak, public debt was flirting with the 100 percent of GDP threshold and private debt was skyrocketing, reaching nearly 140 percent of GDP – far more than that of Italy (106 percent) or Spain (119 percent). And the emergency pandemic response has only accelerated the piling on of debt, with the level of public debt expected to rise above 120 percent of GDP in 2021.

Despite a massive stimulus package of €100 billion ($122 billion) and a loan scheme in which the state has guaranteed up to 90 percent of the loans for companies, France is unable to avoid a wave of bankruptcies. Given the poor state of public finances and the already extraordinarily high level of debt, France has no other choice but to come begging cap in hand to Germany, in order to allow the ECB to print enough euros to enable a massive bailout of its banking system, to prevent a systemic collapse.

3. Blockchain tech kills fake news

In 2021, the mounting threat of disinformation and the erosion of trust in even well-established news providers reaches a critical level, demanding an industry response. Major media companies and social platforms are forced to impose new countermeasures against fabricated and misleading news. The enabling technology is a massive shared blockchain network for news content, which allows distribution of news in an immutable way with a validity check of both the content and the source. Companies like Twitter and Facebook invest heavily in this blockchain tech, motivated first and foremost by self-preservation as the threats of regulatory oversight we’ve seen in recent years become white hot.

4. China’s new digital currency inspires tectonic shift in capital flows

The Digital Currency Electronic Payment (DCEP) will be a blockchain-based digital version of the Yuan (CNY) and in 2019, 80 percent of all payments in China were via WeChat Pay and AliPay. The PBOC wants to take this one step further and in the process improve the efficacy of monetary and fiscal policy through an increasingly cashless society and with a goal of enhancing financial inclusiveness. Opening up China’s capital account and creating a currency that rivals the US dollar for reserve status will help boost Chinese consumption, fund an entirely new Chinese pension system and deepen the country’s capital markets.

5. Revolutionary fusion design catapults humanity into energy abundance

The world will need much more energy if our economy is to continue growing at anything approaching historical rates. New alternative and green energy technologies are for the most part not the answer. The world urgently needs a disruption in energy technology. Enter 2021, in which an advanced AI algorithm solves the super non-linear complexities of plasma physics, clearing the way for commercial fusion energy. The mastery of fusion energy opens up the prospect of a world no longer held back by water or food scarcity, thanks to desalination and vertical farming. It’s a world with cheap transportation, fully unleashed robotics and automation tech, making the current young generation the last required to “work” by necessity.

6. Universal basic income decimates big cities

The COVID-19 pandemic has only accelerated the K-shaped recovery that was driving inequality and tearing at the social fabric before the outbreak. Financialisaton of the economy has meant that a single income is not nearly enough to support a family and technology is another driver, with the growing, wage-deflationary forces of software, AI and automation eroding a widening swath of jobs across industries. The risk that societies are entirely torn apart results in the realisation that the COVID-19 measures weren’t a mere panic response, but the start of a permanent new universal basic income (UBI) reality. The new UBI drives changes in the attitude toward work and life balance, allowing many young people to stay in the communities where they grew up. Meanwhile, the professionals and the marginal workers in big cities also begin to leave, as job opportunities dry up and the quality of life in small, over-priced apartments in higher crime neighbourhoods loses its appeal.

7. Disruption dividend creates Citizens Technology Fund

The march of technology, combined with reliance on the legacy principles of the free market economy, is already undermining the social contract and even tearing at the very social fabric; Covid-19 has only accelerated these trends. In 2021 and beyond, our society will have to find a new policy path if we are to avoid deepening injustice, but also political upheavals, social unrest and systemic risk. In 2021, policy comes in for a major overhaul, with a whole new approach to reducing inequality that has little to do with adjustments to the tax code.

8. A successful COVID-19 vaccine kills companies

The COVID-19 pandemic viciously accelerated the dangerous levering up of the global economy that unfolded during the 2008-09 financial crisis. The policy of near infinite liquidity provision and easing financial conditions at all costs has pushed global sovereign and investment-grade corporate yields to historical lows and forced investors to take positions in riskier assets.

The investors’ risky stance is justified by the prospect of an effective vaccine bringing a new boom in economic growth. In perfect hindsight it turns out the economy was vastly over-stimulated during the pandemic, and the ripping post-vaccine recovery rapidly overheats the economy. Inflation rises and unemployment falls so rapidly that the Fed allows long treasury yields to spike higher, taking the yield on riskier debt with it.

9. Sun shines on silver, which sizzles on solar panel demand

Turbocharging the rise in the silver price in 2021, even relative to gold, is the rapidly rising demand for silver in industrial applications. In fact, a real silver supply crunch is on the cards in 2021, and it frustrates the full throttle political support for solar energy investments under a Biden presidency, the European Green Deal, and China’s 2060 carbon neutral goal, among other initiatives.

10. Next-generation tech supercharges frontier and emerging markets

In 2021, economists discover that the growth rates in many frontiers and emerging markets have been woefully underestimated in recent years. Closer analysis reveals that key technologies may lie at the root of an acceleration in private sector productivity growth far beyond anything seen in the developed markets in recent decades.

The first is the arrival of satellite-based internet delivery systems, which are set to crush the price of internet provisioning and importantly delivering an order of magnitude increase in download speeds.

What do the Arab News columnists think?

Frank Kane: The annual beauty of Saxo’s crystal ball-gazing is that each of them has just a grain of plausibility. The one I find most persuasive is the idea that China could launch a virtual currency that would doom the dollar to second rate status. It could happen - but only after China dumps all its T-bills. My own forecast for ’21 is that there will be a massive realignment among the independent oil companies, under pressure from the new oil era and climate change. So here you go: Saudi Aramco will take over either BP, Shell or Total. You read it here first.

Faisal Faeq: In my opinion none of the 10 Saxo Bank 2021 Outrageous Predictions may cause a shocking impact on the financial market. Simply because these predictions are considered to happen, and the market is ready to expect any of the 10 scenarios. However, the financial market could rapidly go into another deep chaos if steep oil prices fluctuations, similar to what we saw in April, were to happen again.

Cornelia Meyer: There is something in prediction #4: China’s new digital currency inspires tectonic shift in capital flows. However, capital flows will be enhanced by a form of Digital Currency Electronic Payment (an electronic version of the Yuan) and NOT driven by it. The bifurcation of the economy between East and West of Suez, low yields, China’s unstoppable rise and the opening of the country’s capital markets will act as a vortex sucking in capital -- for the next few years at least. My outrageous prediction: A mountain of debt will lead to mass defaults in emerging markets, whose economies were badly hurt by COVID-19. Get ready for an emerging markets’ debt crisis of epic proportions!


GCC chemical projects worth $71bn amid pandemic recovery

GCC chemical projects worth $71bn amid pandemic recovery
Updated 9 min 5 sec ago

GCC chemical projects worth $71bn amid pandemic recovery

GCC chemical projects worth $71bn amid pandemic recovery
  • The projects will become operational between 2020 and 2024
  • Regional chemical production increased 1.5 percent in 2020

RIYADH: Gulf petrochemical projects worth $71 billion are expected to become operational between 2020 and 2024, Al Eqtisadiah reported, citing the Gulf Petrochemicals and Chemicals Association (GPCA).
Regional chemical production expanded 1.5 percent last year compared to a global decrease of 2.6 percent, it said.
Increased demand for raw materials used in medical equipment helped the industry navigate through the pandemic.
This enabled companies to maintain stable operating rates of 93 percent, as commercial activity started to recover in the third quarter of the year.
Still, the regional industry has posted a two-year decline in revenues, said GPCA secretary general Abdulwahab Al-Sadoun.
He said the challenges facing the sector have been exacerbated by supply chain disruptions related to the closure of ports in China and increases in freight rates up to three times the market price before the epidemic, he explained.
This increase has eroded the profits of GCC producers who were already operating on thin margins, he said.


How the pandemic helped 3D printing become mainstream

How the pandemic helped 3D printing become mainstream
Updated 8 min 22 sec ago

How the pandemic helped 3D printing become mainstream

How the pandemic helped 3D printing become mainstream
  • Demand in the Kingdom is coming from critical sectors, such as oil, gas, defense, and utilities

JEDDAH: The global uncertainty created by the coronavirus disease (COVID-19) pandemic was a challenging time for many industries. However, for some, such as Zoom or Amazon, it was a blessing in disguise and a catalyst for accelerated growth.

The 3D printing sector also saw a rapid surge in demand.

Dubai-headquartered Immensa Technology Labs reported that its business grew by nearly 400 percent in 2020, as global supply chains were disrupted, and operators scrambled to find an alternative.

“The pandemic was probably one of the biggest propellers for this technology, the year of COVID-19 is the year that 3D printing grew up and became mainstream,” CEO and founder of Immensa, Fahmi Al-Shawwa, told Arab News.

“3D printing saved the day,” he said, adding: “Whether it was in the medical sector, where we started producing components for hospitals to utilize, or things as big as old refineries, where there had been components that failed, and they could not resource the spare parts, we produced them.”

As one of the biggest markets in the region, Saudi Arabia was an obvious target for expansion. In April, Immensa was the first company in the Kingdom to be awarded an additive manufacturing — or 3D printing — license by the Saudi Ministry of Investment.

Immensa launched into the Saudi market in November through its acquisition of two Saudi 3D printing startups, Shakl3D and LayLabs. Shakl3D was established in 2016 and LayLabs two years later. By combining with Immensa, the larger entity is aiming to scale globally and target opportunities in Europe and North America.

“By acquiring their existing setups and investing in what they have started, we can expedite the development of the industrial 3D-printing sector in the Kingdom and provide both teams with the international platform of Immensa,” Al-Shawwa said.

HIGHLIGHTS

● In April, Immensa was the first company in the Kingdom to be awarded an additive manufacturing — or 3D printing — license by the Saudi Ministry of Investment.

● Immensa launched into the Saudi market in November through its acquisition of two Saudi 3D printing startups, Shakl3D and LayLabs.

● The company has also acquired a 10,000 square foot industrial facility in Dammam and is planning to establish a network of other 3D printing hubs across Saudi Arabia.

The company has also acquired a 10,000 square foot industrial facility in Dammam and is planning to establish a network of other 3D printing hubs across Saudi Arabia.

3D printing is a production method in which materials such as plastic or metal are stacked in layers to create products. It is also known in the industry as additive manufacturing or rapid prototyping.

Immensa is focused on industrial 3D printing, making mechanical and functional parts for the oil and gas, utilities, power, and water treatment sectors. Al-Shawwa is planning to expand the company’s reach to other sectors and industries.

“We already have our plastics and polymer machinery up and running,” he said, adding that its “metal facility will be operating in the coming weeks.”

As part of its overall strategy, the CEO said he is planning a big investment drive in the Kingdom. “Over the next three years, I think we will be investing significantly.”

According to Statista, the global 3D printing market was valued at around $13 billion in 2020 and is forecast to grow at a rate of 26 percent per annum between 2022 and 2024.

At the same time, in its latest report issued late last year, research firm UnivDatos Market Insights said the 3D printing industry in the Middle East and North Africa was valued at $521.4 million in 2018, which is expected to rise to $1.374 billion by 2025.

“Globally, the adoption of 3D printing is growing at around 30 percent per year. I think what we are going to see in Saudi Arabia is it growing by more than four times that, of 150 to 200 percent per year,” Al-Shawwa said.

Demand in the Kingdom is coming from critical sectors, such as oil, gas, defense, and utilities. These sectors pave the way for other sectors, as other industries are slowly adopting the technology in areas like tooling and injection molding, he explained.

The company boasts eight full-time engineers in Saudi Arabia, with plans to increase that to over 20 this year. Al-Shawwa said one of the reasons for their focus on Saudi Arabia was the availability of local engineers.

“The pool of talent in Saudi Arabia is phenomenal,” Al-Shawwa said.

“One of the reasons why we are shifting to Saudi because we don’t have to rely on expat talents. You can actually rely on local talent.”

Al-Shawwa envisions Immensa eventually becoming a Saudi-American company in the next five years. Its primary base will be in the Kingdom, servicing the rest of the Gulf, which has been the company’s main focus market for the last two years. However, it has recently expanded to the US, which will focus on clients in Asia and northern Europe.


Oil industry spending cuts hammer services firm CGG

Oil industry spending cuts hammer services firm CGG
Updated 13 May 2021

Oil industry spending cuts hammer services firm CGG

Oil industry spending cuts hammer services firm CGG
  • A recent pick up in oil prices helped Europe’s major energy companies to post big increases in first quarter earnings

GDANSK: French oil services group CGG posted a 71 percent plunge in first quarter core profit on Wednesday, reflecting a year of drastic spending cuts by the oil industry in the pandemic and sending its shares sharply lower.

In a call with analysts, CEO Sophie Zurquiyah said the quarter had been slow as expected, but predicted more spending in the second half of 2021, noting a resumption of commercial business and contract awards in March and higher oil prices.

“I believe we will see the need for our clients to increase their activity to not only catch up on the work postponed from 2020, but also to compensate for the depletion of their existing reservoirs,” she told analysts in a call.

Zurquiyah confirmed the firm’s 2021 targets.

A recent pick up in oil prices helped Europe’s major energy companies to post big increases in first quarter earnings.

That could bode well for CGG, which cut jobs and sold out of businesses last year as companies such as BP, Total, and Equinor slashed spending.

The Organization of the Petroleum Exporting Countries (OPEC) on Tuesday stuck to its prediction of a strong recovery in world oil demand in 2021, as growth in China and the US counters the coronavirus crisis in India.

OPEC and its allies, known as OPEC+, agreed in April to gradually ease oil output cuts.

CGG posted a first quarter core profit of $36 million, while its multi-client business — which offers seismic data and geological studies — had just one active project in offshore Brazil. Its stock was down over 9 percent at 0725 GMT, the worst performer on France’s SBF 120 index.


SoftBank joins top earners with $37bn Vision Fund profit

SoftBank joins top earners with $37bn Vision Fund profit
Updated 13 May 2021

SoftBank joins top earners with $37bn Vision Fund profit

SoftBank joins top earners with $37bn Vision Fund profit
  • SoftBank has hiked its committed capital in the second fund to $30 billion from $10 billion

TOKYO: SoftBank Group Corp. on Wednesday reported a record fourth quarter 4.03 trillion yen ($36.99 billion) Vision Fund unit profit from an investment gain on Coupang, putting it among the world’s biggest earning firms a year after an unprecedented loss.

Group net profit was 4.99 trillion yen ($45.88 billion) in the year ended March, beating the $42.5 billion made by Warren Buffett’s Berkshire Hathaway Inc. in its last business year.

It also compares with a 962 billion yen loss a year earlier after teetering tech bets depressed the value of Softbank’s portfolio.

“It’s clearly validation of Masa’s thesis,” Navneet Govil, Vision Fund’s chief financial officer, told Reuters in an interview, referring to company founder and CEO Masayoshi Son.

Market enthusiasm for tech stocks drove the public listing of SoftBank-backed e-commerce firm Coupang and used-car trading platform Auto1 Group and the rising share price of ride-hailing firm Uber during the quarter.

To sustain Softbank’s position among the global corporate elite, Son will have to replicate that fourth quarter performance with other yet-to-list companies in the Vision fund portfolio. Son has likened that to laying golden eggs.

Candidates including ride-hailing firm Didi, TikTok owner Bytedance and truck service platform Full Truck Alliance have strong revenue growth, healthy market share and a clear path to profitability, according to Govil.

These companies are “sizeable investments with significant value to be unlocked,” he said.

Much of Vision Fund’s gain, however, is on paper with the value of the portfolio locked up in the stock market amid concern over frothy valuations and a boom in special purpose acquisition vehicles (SPACs), which has drawn regulatory scrutiny.

The total fair value of the first $100 billion Vision Fund and the smaller second fund was $154 billion at the end of March, with SoftBank distributing $22.3 billion to limited partners.

SoftBank has hiked its committed capital in the second fund to $30 billion from $10 billion, reflecting the breadth of investment opportunities, Govil said.

Two of SoftBank’s highest profile bets, space sharing firm WeWork and ride-hailing firm Grab, have outlined plans to list via SPAC mergers, with Vision Fund reportedly in talks to use its own such vehicle to list portfolio company Mapbox. The Grab deal offers further upside for the Vision Fund should the transaction go through, Govil said.

The group’s trading arm, SB Northstar, is expanding deal making this week leading a $1 billion investment in acquisitive e-commerce firm THG.

SB Northstar and the broader group recorded a 233 billion yen loss on investments in listed stocks and derivatives as efforts to work cash reserves outside the Vision Fund sputter.

SoftBank has completed a 2.5 trillion yen buyback program launched last year, which pushed the stock price to two-decade highs in March. The end of the buyback pulls support at a time when shares are sliding in line with weakness in US tech stocks.


Global demand for diamonds rebounds

Global demand for diamonds rebounds
Updated 13 May 2021

Global demand for diamonds rebounds

Global demand for diamonds rebounds
  • Sales by the state-controlled company totaled $1.6 billion for the first four months of 2021

MOSCOW: Russia's Alrosa, the world’s largest producer of rough diamonds, said on Wednesday its April sales of rough and polished stones rose by 12 percent month-on-month to $401 million after demand for diamond jewelry strengthened in the main markets.

Global demand for precious stones has been recovering from the impact of the coronavirus disease (COVID-19) pandemic since the second half of 2020.

Sales by the state-controlled company totaled $1.6 billion for the first four months of 2021. At the height of the pandemic in April 2020, Alrosa’s sales were only $15.6 million. 

They rose to $357 million in March this year.

Alrosa, which competes with Anglo American unit De Beers, is gradually restoring its production after last year's 22 percent reduction. It plans to return to its usual annual output of 36-37 million carats within 2-3 years from 31-32 million carats in 2021.

Rough diamonds account for the bulk of Alrosa’s sales, although it polishes those of rare colors or of large size for sale in auctions.

“Our April sales were well supported by the successful results delivered by auctions of high-quality large rough, as well as by strong sales of polished diamonds,” Evgeny Agureev, its deputy chief executive, said in a statement.

A 100.94 carat stone called the Alrosa Spectacle — the largest polished diamond ever cut in Russia — will be auctioned by Christie’s in Geneva on Wednesday.