We Like Stocks Tuned to the Young, Health­care, IT

The Economic Times - - Money -

Ge­off Lewis, global mar­ket strate­gist with Cap­i­tal Mar­kets Group of Man­ulife Asset Man­age­ment said he is neu­tral on In­dia in the short term but be­lieves the longterm out­look re­mains pos­i­tive. In an in­ter­view to Sanam Mir­chan­dani, Hong Kong-based Lewis said there is still no case to be over­weight on emerg­ing mar­kets: Edited ex­cerpts:

Is the re­cent rally in emerg­ing mar­kets sus­tain­able? At the start of the year, we saw a big fright over US mone­tary pol­icy, China hard land­ing, strong dol­lar ap­pre­ci­a­tion and col­lapse in com­mod­ity prices. We are now see­ing that those fears were ex­ag­ger­ated. But there are not much signs of big im­prove­ments. We need to see an in­flec­tion point in earn­ings for Asia and signs that ex­ports are start­ing to im­prove. If that hap­pens, emerg­ing mar­kets can see a pow­er­ful rally. In­flows into emerg­ing mar­kets have been pos­i­tive in the last 3-4 weeks but the sus­tain­abil­ity will de­pend on whether we are mov­ing to­wards a stronger global econ­omy.

Are there con­cerns about the long-term growth prospects of emerg­ing mar­kets? In the long term, even if emerg­ing mar­kets grow slowly than in the past, a 3-4% (growth) in a coun­try like Tai­wan or Korea is bet­ter than a growth of one-and-a-half to 2% in the US. From a three- to fiveyear view, we place emerg­ing mar­kets as pos­i­tive and the val­u­a­tions also look good. But we are still in a sit­u­a­tion where there is not enough growth and ma­te­ri­ally bet­ter ex­ter­nal prospects for emerg­ing mar­kets. There are no real green shoots as far as the eco­nomic data is con­cerned in emerg­ing mar­kets. We will see a short term rally, then a bit of dis­ap­point­ment. The worst is prob­a­bly over in terms of emerg­ing mar­kets’ rel­a­tive un­der­per­for­mance but there is no strong case to be go­ing back heav­ily over­weight just now.

ON EMs’ SHOW

Where does In­dia stand then? On In­dia, we are neu­tral in the short term but the out­look is rea­son­ably good in the long term. In­dia has got its do­mes­tic growth sorted, in­fla­tion is un­der con­trol and it has a cred­i­ble cen­tral bank. We need to see signs of bet­ter earn­ings and in­vest­ment pick-up in In­dia.

What is your as­sess­ment of the Re­serve Bank of In­dia’s pol­icy? The 25 ba­sis points cut was in line with ex­pec­ta­tions and war­ranted by un­der­ly­ing in­fla­tion trends, but I do not ex­pect a rapid suc­ces­sion of cuts — maybe one more in 2016.

What are the themes or sec­tors that you like in In­dia? The themes we like are stocks that are tuned to the younger gen­er­a­tion of In­dian con­sumers, lead­ers in IT, health­care and some in­dus­tri­als like aero engi­neer­ing, plus some bud­get air­lines. We are avoid­ing energy and ma­te­ri­als.

Is the worst over for China? S&P has re­cently cut the coun­try’s credit rat­ing... China prob­a­bly has done enough in terms of fis­cal and mone­tary pol­icy eas­ing and the sta­bil­i­sa­tion of growth will prob­a­bly be­gin in the sec­ond quar­ter although the data doesn’t re­ally show it yet. There is not enough ev­i­dence yet that the Chi­nese econ­omy has stopped de­cel­er­at­ing but I think they are do­ing enough. We be­lieve that China will sta­bilise in the sec­ond quar­ter and that would be quite im­por­tant for emerg­ing mar­kets.

What do you think of US Federal Re­serve chair Janet Yellen’s re­cent dovish com­ments? Com­ments from Yellen were very mea­sured, bal­anced and sen­si­ble. It was mis­in­ter­preted to a de­gree in the me­dia that this is a ma­jor change in the US pol­icy to give a much big­ger weight to the fragility in other economies. We have a high con­vic­tion that there is not go­ing to be a US re­ces­sion. The US is in a much bet­ter place than Europe, Ja­pan, Rus­sia and China.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.