Noor Capital | Dubai TV, Mohammed Hashad’s Interview, October 31

Interviewed by Dubai TV, on Monday, Mohammed Hashad, Head of Research and Development at Noor Capital and member of the American Association of Technical Analysts, commented on, and highlighted the latest developments in the financial markets; and most notably the continued US and European interest rate hikes, while inflation levels are still very high, and in response to a question whether there are solutions in the foreseeable future to the inflation dilemma; specially after the markets recorded inflation levels up to 10% and 17% in the Eurozone, Hashad replied: “The level of inflation is still stubborn and difficult for the governments of countries and major central banks to tame until now. inflation remains around high levels within the European bloc, and in the United States. The United States’ inflation is at its highest level in decades.”

“Therefore, a number of governments may resort to taking some additional measures, and it is possible to see some governments resorting to raising taxes, and this will, in turn, reduce consumption. There are means and solutions that include, among other things, cutting governmental expenditures, as well as working to raise the efficiency of supply chains in order to be able to accommodate and meet any potential increase in demand. Governments may also resort to other means such as reducing the cost of health care. Other governments may impose taxes on the wealthy in order to reduce inflation, in the event that raising interest rates fails to tame stubborn inflation”, Hashad added.

On the other hand; in the Eastern Hemisphere, economic data in China is in the spotlight, with a widening trade deficit, fears of a looming real estate crisis, and finally a decline in manufacturing activity, and in response to a question about the extent to which recent developments in China could threaten the trajectory of the global economy, Hashad replied: “The Chinese economy is going through a crisis at the present time, due to the apparent slowdown in many aspects of economic activities, on top of which is the declining manufacturing activity. There are two main reasons behind such obvious decline; firstly: The first: the expansion and the continuation of epidemic lockdowns prevent the spread of Covid-19 infection, and secondly: the increasing number of real estate development companies that defaulted on their debts during the past year, which makes it difficult for the real estate sector to obtain loans from the market, and therefore; the challenges which the banking sector has to encounter become numerous, and as a result we saw how the International Monetary Fund lowered its growth expectations for China for the second time this year 2022, to 3.2 to 4.4, and therefore, the Chinese economy is about to enter a dark tunnel.”

When asked whether the decline of the Chinese economy has repercussions on the global economy’s outlook, as happened during the global economic crisis in 2008, for example, Hashad suggested that it is possible for governments to intervene in one way or another, specifically the intervention by the Chinese government, “If there is a decline In some respects, the matter will not be exacerbated by the severity of a crisis similar to the economic crisis that the markets witnessed in 2008,” he added.

With regard to US interest rates, amid expectations indicating the possibility of raising US interest rates to 4% or 5%, and in light of the downgrading Argentina’s credit rating by Fitch Agency, last week, and in response to a question about whether other countries’ ratings could be added to Argentina, Hashad said “In general, raising the interest rate in one of the major global economies is considered one of the most harmful things for emerging economies, because the continuation of major countries, such as the United States of America, to adopt more interest rate hikes would similarly lead developing countries, which embrace emerging markets, to raise interest rates, and thus, they would suffer in several ways, such as entering a recession, in addition to damaging jobs and other severe damages on the shoulders of commercial suppliers and most importantly withdrawing liquidity from emerging markets”, Hashad noted.