We see significant drivers of share market [earnings per share] upside over the next 2-3 yrs as elevated food inflation does not show signs of waning soon...Persistent food inflation and higher grocery prices being passed through to consumers are factors that should contribute to future earnings strength.
This is unfortunately another problem of long term inflation....there is an issue of "perception" from the public. If these high levels of inflation get entrenched in our economy and in people's thinking, then inevitably (lama-lama) that will lead to much tighter monetary policy..ie higher interest rates.
In calculating inflation numbers, Actual cost push & demand lead inflation is one thing and so is petrol scarcity which drives up HEADLINE inflation, but another aspect is expectation of inflation by the public.
As i mentioned in an earlier summary, in our country wage push cost hikes normally starts this ball rolling. All down stream activities automatically increases once the public factors in FUTURE inflation! You can see this once you see normal hawker food (cooked food) prices increase by a ringgit or two more than usual.
Short term effect of such expectation however will be lesser demand by the public but this is temporary as inflation is just as much a perception problem as much as it is an actual labor and material cost push.
This lower demand of course initially results in recession but if that is allowed to carry on long enough....then we see stagnant inflation...stagflation!
Now, for the big picture...
Another inflation driver would be how much interest govt and GLC is holding at any given time.
Kenapa you tanya?
Kerana kena bayar bunga atau riba... Right now, malaysian External Debt has reached 256.4 USD bn in Dec 2021, (ermm ...that's RM 1 Trillion) compared with 252.4 USD bn in the previous quarter.
The Fed last month began raising interest rates by 25 basis points and officials have signaled they are preparing to hike rates by 50 basis points at upcoming meetings.
At least six more rate hikes may be in the pipeline according to market analysis.
Apa maksud semua ini....maksudnya kerajaan dan badan bukan kerajaan yang mempunyai hutang lapuk dalam US Dollar akan mengerang kesakitan sebab kos pembayaran riba akan meningkat...
Tapi apa kena mengena dengan kita?
Sebab institusi institusi ini perlu meningkatkan harga produk mereka untuk mampu membayar "kos bunga" baru yang meningkat.
Sebagai perumpamaan, harga baja agrikultur naik kerana kita impot bahan utama baja (potash) dari Russia dan bayarannya dalam US dollar. (Selagi bukan membayar dalam Ringgit kita bermasaalah).
Harga baja naik, maka harga kailan pun naiklah.
Does this mean we all need to suffer high prices and lower our expectations in coming days?
That depends...are you earning more than average pay or have income above your expenses today? That is basically how the disparity eventually ends, actually.
Those with resources will coast the next few years with only minimum disruption to their lives but others will not.
That is why i mentioned in my earlier musings this is a lost opportunity decade for many families. ( in my earlier writings). I had seen this play out in my teens in the 70s when many families dropped a rung or two from middle class type of life to poor or even poverty level eventually and it only stops when the young children grow up to add their earning power to the family pool.
But in doing so, these children go through decades of lost opportunity as their salary and income is capped by their ( low) education and certs.
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