Taimur Hyat, COO, PGIM, joined Francine Lacqua on Bloomberg Surveillance to discuss the increasing number of firms being driven by intangible assets as well as the investment implications this new corporate landscape presents.
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[DESCRIPTION: Opening screen. Image of Taimur Hyat looking at camera, with a blurred background. At the bottom of the screen is written "Political Risk and The Markets". Screen then splits in two. To the left is Francine Lacqua of Bloomberg Surveillance speaking to the camera, with images of the Belgian and European Union flags in the background. At the bottom of her screen is written "Brussels". To the right is Taimur Hyat, and at the bottom of his screen is written "London". Below the two screens is written "Political Risk and The Markets". Francine Lacqua asks the following question.]
[AUDIO: Where do you see worldwide the key sectors that you want to be invested in? I know you focus a lot on technology stock. If you look at politics around the world, they will look at possibly breaking up a lot of these big technology giants. How will that change the way that you look at investments?]
[DESCRIPTION: Taimur Hyat responds as follows to the question, during which time his name and title, "PGIM Chief Operating Officer", are displayed, as are updates on NASDAQ Futures at the bottom of the screen.]
[AUDIO: I think, Francine, in three ways when we think about opportunities and risks around the world. One, there's absolutely a lot of regulatory risks around the big superstar firms particularly in the technology sector in the developed world, but you have set of superstars in emerging markets, whether it's Mercado Libre in Argentina or Flipkart in India, we certainly don't recommend individual securities, but there are superstars in emerging markets where these regulatory pressures are less, and yet they have the network effects and scale to really build positions. That's certainly one theme. A second theme we are seeing, we just did some work on the weightless firm. Increasingly firms are driven by intangible assets. They represent about 85 percent of the value of the S and P 500, and these firms are increasingly in the private sector. So, we would say private debt and private equity alongside public markets is increasingly the way you get to the throbbing heart of the entrepreneurial economy in Europe and the U.S.
[DESCRIPTION: A chart of the S and P 500 year-to-date performance from February to October 2019 appears on screen as Taimur Hyat continues to speak.]
[AUDIO: So, we would say increase your focus on private debt, and we have worried about China not just because of the trade pressures, but we do think debt sustainability is an issue there as well, and therefore, we have lowered our China focus which affects how we think about them in the kind of geographical allocation scheme.]
[DESCRIPTION: Return to split screen, with Francine Lacqua to the left and Taimur Hyat to the right. Francine Lacqua asks the following question.]
[AUDIO: And this Taimur, is independent on whether we have a trade deal or do you assume that we get a phase one deal and then this kind of uneasiness, whether we call it trade tension or trade war between the U.S. and China stays for many years to come?]
[DESCRIPTION: Return to full screen featuring Taimur Hyat, with his name and title again displayed onscreen and the S and P Futures displayed at the bottom of the screen.]
[AUDIO: I think the trade tension takes about one-third or one percent of U.S. GDP and a little more in China, but we're worried about debt sustainability there. Interest payments in China are probably nine, ten percent higher than their nominal GDP. We worry about credit growth being slowed down there, and then you have the long-term working age population decline in China. So, I think they go beyond just the trade deal although that certainly exacerbates things and it provides some relief rally in the near term.]
[DESCRIPTION: Francine Lacqua thanks Taimur Hyat and video clip ends.]