Transcript of Finance News Network Interview with John Trudgian, a partner from Williams Inference.
Lelde Smits: Hello, I’m Lelde Smits for the Finance News Network and joining me to look at the next market moving trends is John Trudgian, a partner from Williams Inference. John, Welcome to FNN.
John Trudgian: Thanks Lelde.
Lelde Smits: Williams Inference tracks changes in the business environment through inferential scanning, the process of reaching conclusions beyond the immediate data. So John, what’s catching your attention at the moment?
John Trudgian: I’m looking at a couple of things on a large scale, long term, to do with agriculture, to do with population growth, particularly urbanisation, the aging population and the rise and rise of technology. They’re the mega trends that I’m looking at, at the moment. And in a smaller picture, or the more immediate growth opportunities, where I’m looking at is specific skill shortages and that’s around automation and computers, mobile in particular. And in terms of geography, I’m very interested in ASEAN [The Association of Southeast Asian Nations], our close neighbours - They seem to be well positioned for growth at the moment.
Lelde Smits: China is forecast grow to the world’s biggest economy over the next decade or so. What are the main drivers you’ve identified that are behind the nation’s growth?
John Trudgian: They work very hard. That’s something that’s really surprised me is when I’ve been up there working on conferences, working on consulting jobs. They work all weekend, flat-out, in fact that’s almost a problem for the consumer story in China.
Lelde Smits: And which Australian companies or industries do you believe are positioned well to benefit from the rise of China?
John Trudgian: One obvious area is tourism; I mentioned this pent up demand for leisure and leisure experiences and travel, and tourism has got to be a huge opportunity going forward. You do need to accommodate to the Chinese and I think that might be something that might have to be a little bit governed by the government’s approach to training and so on to deal with the Chinese. Other areas, of course resources, we’ve got that well covered, and agriculture is a particular area that I think can grow and grow; Chinese demand for food is going to the big issue, political issue around the world.
Lelde Smits: Now you have mentioned agriculture and it is another sector gaining popularity, fuelled by fears of a global food shortage. So John, how do you expect this shortage will be met?
John Trudgian: It’ll have to be met through higher prices, that’s the mechanism that we use to allocate resources and if we need more resources in agriculture than prices should rise.
Lelde Smits: The growth of Australia’s mining industry is dependent on China – so do you believe demand for Australian resources is growing or falling?
John Trudgian: I’m not convinced about the sustainability of these higher iron ore prices, but the Chinese do have a lot of infrastructure to build over the next twenty years, and there will be strong demand for resources continuing.
Lelde Smits: Energy stocks have been a hot favourite of late. How do you see demand and supply trending?
John Trudgian: I think the area of natural gas is really where the main transition is occurring at the moment. We in Australia- Woodside Petroleum Limited (ASX:WPL) and others- sell a lot of expensive gas into Asia, and the Americans have very cheap gas, and they’re looking to export that. I’m concerned that we won’t be able to maintain high prices into Asia, and that also follows into Europe. The price of gas is very high in Europe, so we tend to see sort of an equalisation of gas prices, and that will be at the expense of some of the more grandiose offshore projects; may not be as higher return as they have been predicted.
Lelde Smits: And which stocks do you believe are the best positioned to benefit from the energy boom?
John Trudgian: What I see is with the advent of new technologies- fracking and directional drilling and so on- new life for existing fields. I’m very interested in the Cooper Basin, Beach Energy Limited (ASX:BPT), where they’ve found opportunities to go below the existing structures and find even more, and of course that’s a lot cheaper to do it onshore. It doesn’t have quite the same ring to it as huge offshore floating platforms but often more profitable. So I would look in existing fields for extension plays.
Lelde Smits: John Trudgian, thank you so much for the outlook.
John Trudgian: Pleasure, thank you.