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Darkness at dawn: will light pierce the gloom in 2009?


Sunday, 4 January 2009

Mikhail Prokhorov, President, Onexim Group

Known as: Russian oligarch who is the world's 24th-richest person, according to 'Forbes' magazine

The company: Investor in the mining industry

The world was too optimistic. Like every system and every model, the present one has come to an end. It was inevitable that the problems with real estate in the US would touch the banking system.

If I can paraphrase Chinese philosophy: the good and experienced soldier needs to wait and look on the river for good assets coming. The best thing now is to wait. I will not, for the time being, invest in portfolio investments. They can't be predicted.

Now is an excellent opportunity to invite the best people from investment banks to these markets. Investment banking is not capital; it's relations and ideas. One of the competitive advantages of Russia is the self-made nature of many of its business people. They have faced much adversity in the past and will fight to ensure success in the future.

Richard Bowker CBE, Chief executive, National Express Group

Known as: Tony Blair's favourite mandarin, when chief executive of the Strategic Rail Authority

The company: FTSE100 public transport provider

One of the early effects of the current downturn has been a change in the behaviour of consumers. Transport is rightly considered to be a defensive sector but it is certainly not immune to the effects of the downturn. People are generally becoming more savvy about the way they are planning their travel. We are seeing new customers choosing public transport to meet some of their travel needs, many of them for the first time, while others are taking advantage of advance fares instead of the more flexible "on the day" options.

The successful firms in 2009 are going to be those that adapt best to the changing behaviour of their customers and I'm determined that National Express will be one of them.

Neil Berkett, Chief executive, Virgin Media

Known as: a straight-talking New Zealander with experience in banking and transport

The company: cable firm aiming for five million UK customers by 2010

There aren't many times in your career when you can say you've witnessed a truly game-changing moment, but our launch of ultrafast 50Mb broadband in December was one of them.

As the service rolls out to over 12 million homes in 2009, it heralds an exciting start to next-generation broadband access in the UK. This is a revolution, not an evolution, which will change everything we do. It will transform the way consumers interact and entertain themselves, and each other, online. And for content producers it will provide a hi-tech canvas for innovation and experimentation.

We are on the precipice of some fundamental changes in the way people watch television, too. The giant leaps we've taken already show how popular on-demand viewing has become, and this is set to grow exponentially this year as people expect to be able to watch what they want, when they want and how they want.

Geoff White, Chief executive, Lonrho

Known as: a former aide to Sheikh Khalifa al-Thani, the Emir of Qatar

The company: Pan-African uranium-to-hotels investor, famously once run by Roland "Tiny" Rowland

As a market, sub-Saharan Africa (excluding South Africa) is feeling the impact of the global financial crisis. But the good news is that due to its position as an emerging market, in a developing continent starting from an incredibly low socio-economic base, Africa has to a great extent avoided direct damage from the global credit crunch.

Excluding South Africa, sub-Saharan African businesses have been struggling to raise commercial debt for decades. Personal finance is practically non-existent and African regional banks are traditionally very old-fashioned, operating with debt ratios similar to 1970s Europe. The result is that the world's financial crisis has not had a direct impact, but there has been an indirect one. This has been triggered by less external institutional financial support being available to the African banking system, and by the significant reduction in commodity prices.

After demonstrating a strong growth in GDP, 6 per cent in 2007-2008, the region was forecast at least to maintain this momentum. In light of the global slowdown, however, current estimates put GDP growth for 2009 in the 4 to 5 per cent range.

But compared to global markets, this remains very encouraging. The economic powerhouses of the region, led by Angola and followed by Equatorial Guinea and Ghana (not forgetting Kenya's continued growth and renewed attraction to the US), are very attractive investments in today's depressed economic climate.

Samir Brikho, Chief executive, Amec

Known as: Lebanon-born 50-year-old who pushed Amec into the FTSE100 following his appointment in 2006

The company: £2.3bn oil, gas and nuclear engineering business

As an international business providing engineers, project managers and consultants for complex projects, changes in the energy and power markets will be of real interest to us in 2009. Accurately predicting oil price movements will be almost impossible. More certain is that the long-term drivers for growth remain strong. The world's population is growing, which increases the demand for energy. There is a long-term need to replace depleted oil reserves and to ensure we have security of supply, while tackling climate change by investing in green energy, including nuclear.

The UK has a real opportunity to gain competitive advantage from developing people's skills and technologies, and it must invest soon or run the risk of an energy gap. The sector remains attractive.

Ric Traynor, Executive chairman, Begbies Traynor

Known as: the man who warned that corporate failures would increase after banks lent to "any rag-bag business" in early 2007

The company: restructuring group that last month predicted 15 big- name retailers would go bust by the end of January

With recession biting hard, corporate insolvencies will rise sharply over the next two years, almost certainly to higher levels than the last peak in 1992 when they totalled nearly 30,000. This compares with 15,000 failures in 2007.

Some sectors will fare worse than others, with retail, construction, property, financial services and leisure enterprises facing particularly tough times. The knock-on effect will be a rise in personal bankruptcies.

The great challenge will be finding willing buyers with the necessary funding to rescue struggling businesses. We are now seeing more involvement from business angels and other alternative sources of funding, with whom we have been working increasingly often recently, and who are filling some of the debt gap left by traditional lenders.

Kit van Tulleken, Executive director, Quayle Munro

Known as: the editor of Time-Life Books for 14 years

The company: mergers and acquisitions adviser particularly renowned for its media expertise

Media will be one of the most interesting sectors to watch in 2009. M&A activity will continue in the sector, particularly in the area of small to medium-size portfolios and companies that can be folded into larger entities. As with the market as a whole, however, the availability of credit will have an impact on the activity of both strategic and financial buyers. Private equity groups will return to their roots, using more equity than debt in their transactions, while the larger corporations may find more opportunities with less competition. Consolidation and valuations will be driven by the quality of the business, its intellectual property and its growth prospects. Certain "old media" businesses supported by print and classified advertising will find it increasingly difficult to operate in the modern online environment. But these issues will throw up interesting opportunities for those who have cash and a long-term outlook.

Simon Denham, Managing director, Capital Spreads

Known as: the man who admitted that around 80 per cent of his company's clients lost their bets

The company: online financial spread-betting firm with around 10,000 customers

Markets look like starting off 2009 on the front foot, thanks to the usual new-year rally. We can expect a raft of dodgy data in the first few months, coupled with some heavyweight redundancy announcements that will probably cause the odd sharp downward shift, but it is a truism that the market usually turns once news (whether good or bad) starts to be discounted.

Recently, there has been a whole swathe of disastrous announcements, from banking to retail, and yet the markets remain pretty much unperturbed. So I would expect there to be a solid rally in the first few months.

Unfortunately, though, I very much fear that the news will turn materially worse towards the end of February and through March. This could well trigger a second bear phase that might take out the lows of October 2008.

New investment money will be tight in 2009 and, in its absence, the continued redemption of pension and hedge fund capital may well put a lid on any "irrational exuberance". A tough year in prospect.

Tony Pidgley, Chief executive, Berkeley Group

Known as: the former Barnardo's boy who mangles his language but always calls the housing market right

The company: the most resilient housebuilder in the market, with a cash balance approaching £150m while rivals struggle to renegotiate their debt burdens

Housebuilding levels will stay at around 60,000; the Government's target is about 250,000 homes a year. The Government will try to do something to stimulate the housing market, but it won't be able to turn the wheels fast enough. The current level of interest rates does make housing attractive, but unless that feelgood factor returns, prices could still soften further.

The lack of confidence at the moment is the most acute I have seen in my 40 years in the house- building market, and I think the tragedy of the whole situation is that while the big players will be supported by banks, the smaller guys who build 50 houses a year will suffer. Those mid-size companies will go out of the industry, either through bankruptcy or packing up and never returning to the sector.

We're going to miss them, as by definition of their size they can control the quality of the homes.

Gay Huey Evans, Vice-chairman of investment banking, Barclays

Known as: a heavyweight adviser with the big-money sovereign wealth funds, and a former director at the Financial Services Authority

The company: now more than 300 years old, the bank has 42 million customers and clients worldwide

There are great challenges this year as banks continue to deleverage and to clean up their balance sheets. There is still a lot of cleaning up to do before the credit markets can start operating properly again – something I don't think will happen for a long time. This crisis is going to be protracted and it will take between 18 months and three years at least before we get back to some sort of normality in the markets.

But I also see great opportunities, particularly in gold and other commodities which will become popular asset classes this year. This will be the case for speculators as countries such as China and India will continue to grow.

On the regulatory front, there needs to be reform of the global financial community, certainly the International Monetary Fund and the World Bank. The crisis has shown that the G7 countries are not wholly representative of the geopolitical situation; there needs to be more recognition of the part that China and India can play on the international scene.

In times of crisis, countries start operating like nation states and I don't think that international regulation can work on a global scale. Instead, we need cross-border treaties and more exchange of information so that countries can work together more closely.

The Financial Stability Forum [an international grouping of central bankers and finance ministries] is probably the best and most robust body we have and is a natural to take on this role.

Source: Independent

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More Resources

Commentary and opinions: a selection of excerpts from speeches and presentations by Mikhail Prokhorov