Emerg­ing mar­ket is en­ter­ing a pos­i­tive pe­riod: Bill Mal­don­ado

Mint ST - - BUSINESS OF LIFE - Latha Venkatesh & Anuj Sing­hal

Not seen any last­ing im­pact of elec­tions over the past 20 years, says Bill Mal­don­ado, global chief in­vest­ment of­fi­cer, equities, and Asia chief in­vest­ment of­fi­cer, HSBC Global As­set Man­age­ment, adding that emerg­ing eq­uity mar­kets, es­pe­cially Asia are at­trac­tive. Edited ex­cerpts:

What is your out­look for 2019?

We may be mov­ing into a slightly more pos­i­tive pe­riod for global mar­kets, for equities per­haps, es­pe­cially for emerg­ing mar­kets

(EMS) and Asia. A cou­ple of things that have been big head­winds in 2018, namely the US Fed’s stance on in­ter­est rate hikes and the trade ne­go­ti­a­tions are turn­ing a bit more neu­tral. Per­haps it is a lit­tle bit early to say that they are turn­ing into tail­winds, but they are cer­tainly turn­ing a bit more neu­tral.

I think that will al­low the un­der­ly­ing pos­i­tive char­ac­ter­is­tics of the mar­ket to come out. What I mean by that is that val­u­a­tions are very cheap and profitabil­ity dur­ing this en­tire very volatile pe­riod has been im­prov­ing at kind of a quite sig­nif­i­cant dou­ble-digit rate of growth. This has left us with a very at­trac­tive mar­ket. So, if we can turn some of these head­winds even to neu­tral, with­out a tail­wind, we can have a very pos­i­tive pe­riod in the mar­kets.

You were speak­ing about a pos­i­tive pe­riod for equities but if you looked at US per se, the tax ad­van­tage that the com­pa­nies had ear­lier is not go­ing to be avail­able.

There is no in­cre­men­tal ad­van­tage com­ing in and the sec­ond largest econ­omy China, even with­out the trade is­sues, ap­pears to have a slow­down. It could be the bank­ing prob­lem, it could be years of ac­cu­mu­la­tion as­sets in state-owned com­pa­nies. The two largest economies have in­her­ently risen to slow­down. Doesn’t that bother you?

We have to get a mea­sure of the de­gree of slow­down. Don’t for­get in 2017 and go­ing into 2018, we had very strong global syn­chro­nized growth way above trend rates of growth cou­pled with very low in­fla­tion. So, we had a real Goldilocks pe­riod. It was a very strong pe­riod of time for the mar­ket and we saw the con­se­quences of that in 2017 with very strong as­set per­for­mances. In 2018 and now into 2019, we have seen some­what of a slow­ing down and less syn­chro­ni­sa­tion, glob­ally.

But putting that into per­spec­tive, we are still grow­ing at or around trend rates of growth still we have very low lev­els of in­fla­tion and rel­a­tively low lev­els of in­ter­est rates. So, I don’t think we can get too pes­simistic about that. That is still a very good en­vi­ron­ment.

The un­der­ly­ing fun­da­men­tals of the mar­kets are very strong.

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Bill Mal­don­ado, global chief in­vest­ment of­fi­cer, equities, and Asia chief in­vest­ment of­fi­cer, HSBC Global As­set Man­age­ment.

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