Emerging market is entering a positive period: Bill Maldonado
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.
Bill Maldonado, global chief investment officer, equities, and Asia chief investment officer, HSBC Global Asset Management.