Ru­pee Could Eas­ily Hit 60: Mark Mo­bius

The Economic Times - - Smart -

the world. The Fed has been be­hind the curve, didn’t an­tic­i­pate the big cri­sis that we had in the US and now they seem to be too slow in mov­ing in the other di­rec­tion. We are in a sit­u­a­tion now in In­dia where there is an opportunity for the ru­pee to get stronger.

Where do you see the ru­pee by the end of this year? The ru­pee could eas­ily hit 60 against the US dol­lar. It is quite pos­si­ble.

Is the re­cent wave of loan waivers across states in In­dia a con­cern? No, the main con­cern that we have at the state level is that some states are in­tro­duc­ing new taxes. Maybe that’s a re­ac­tion to the coun­try­wide sales tax in­tro­duced by Modi and some states are maybe try­ing to make up for any pos­si­ble losses by in­tro­duc­ing new ones.

Ear­lier this year, you had said that one should in­vest more in emerg­ing mar­kets, par­tic­u­larly Asia. Which are the top in­vest­ment des­ti­na­tions for you within Asia? In Asia, China is right up there at the top and then In­dia and Thai­land fol­low. Then there is Korea and Tai­wan. Among the smaller mar­kets, Viet­nam would be most in­ter­est­ing. Emerg­ing mar­kets are eyeing the Septem­ber meet­ing of the Fed for cues on how they will carry out their bal­ance sheet un­wind­ing. As an in­vestor with bil­lions of dol­lars at stake in EMs, how do you see this un­fold­ing? Cen­tral banks in US, Europe and Ja­pan have been ex­pand­ing their bal­ance sheets dra­mat­i­cally. But then if you look at the loan-to-de­posit ra­tios of banks, it is going down. The banks are not re­ally util­is­ing these funds to lend to busi­nesses to the de­gree that they should be. With the re­duc­tion in the bal­ance sheet of the cen­tral banks, we may see ac­tu­ally an ex­pan­sion of lend­ing from reg­u­lar banks be­cause they are going to have the where­withal and the de­sire to in­crease their lend­ing. We may see a com­pletely dif­fer­ent re­ac­tion to what ev­ery­one ex­pects.

You re­cently said that US in­vestors bet­ting on eco­nomic boom un­der Pres­i­dent Trump are bail­ing. What does it mean for EMs? One thing that US in­vestors have re­alised is that they are very un­der­weight in emerg­ing mar­kets. Since the be­gin­ning of last year, emerg­ing mar­kets have out­per­formed the US mar­ket. This has caught the at­ten­tion of in­vestors and they are there­fore, going to be prob­a­bly in­creas­ing their weight in the emerg­ing mar­kets. In­dia will ben­e­fit from that as well.

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