ET Now caught up with Jim Walker, Founder & MD, Asianomics, for his views on the Asian markets. Excerpts:
There is a real buzz in Asia right now as economies in the region here power head. How are you viewing the investing environment in Asian economies, particularly when it comes to India?
It is quite interesting to look at how people are viewing the region. You quite rightly said people are seeing it powering ahead, but this is very much on a year on year basis. Last year in the first half of the year, economic activity was weak. This year because of something about rebound looks as if the region is powering ahead, but some of the momentum is probably slipping though especially as we start to see problems arising in the US and in Europe going into the second half of this year.
India, in particular, the valuations are pretty stretched. The economy seems to be doing quite well. At the same time, interest rates are definitely going to go up further from and the export sector will be struggling. So if anything at the moment, we would actually be taking some trading profits in India.
Monsoon though in India has been normal this time around and Indian companies are reviving their capex plans as well. How do you see these two factors playing on rural and corporate incomes in the coming months?
Certainly the improvement in the monsoon this year is a huge benefit for India. It takes a lot of the pressure of consumer prices because the expectation will be a much better harvest, much better vegetable supply, some of the facts is behind the high CPI and the high PPI over the course of the last year.
So inflation will come off relatively sharply in India and that really improves disposable income rather than incomes per se. It means that Indians will have much more available money to spend on other things other than essentials, food in particular. So that is positive going forward for broadening of the demand base in India and of course an improvement in real incomes as food prices come down. So the normal monsoon is a major positive right across the board.
Just shifting focus since you did talk about US, what are your views in growth investment economies, particularly the US right now? Now looking at the recent jobs data and housing prices, do you see FED going for another asset buying spree to support growth if required because El-Erian of PIMCO recently said that US recovery is indeed losing momentum and the situation is getting alarming?
We sent a message to our clients a couple of months ago in June with a report that was just called double dip. So our view of the prospects for the US, and I am afraid for Europe as well, is that it will probably go back into recession over the course of the next 2 to 3 quarters. That is really a consequence of the policies of being forwarded by the FED, done by other central buyings as well as governments around the world. There has not been new revival in the private sector across Europe and the US basically because there is too much debt in the first place and that debt is now being paid down with no revival in the private sector and cutbacks in the public sector.
Sunday, September 5, 2010
Tuesday, August 31, 2010
India can grow between 8.5% and 9%: Infosys
Are you happy with the kind of numbers we have clocked in in terms of GDP, 8.8%, in line with street estimates?
Yes, these are great numbers as expected because if you look at globally, there are very few pockets of growth and India is one economy growing at 8% to 9% and 8.8 is what people are expecting. Some of them are expecting close to 9. So these are great numbers.
Most people say that services are bit of a black box for the next couple of quarters as well. It came in at 9.7% in Q4 of course. How do you expect services to pan out because most people are bullish about agriculture, not too bullish about industry. What about services?
Growth is possible, but you have to look at the global indicators also because if you look at globally, all the leading data from the US are too negative, so also Europe. So to that extent if something drastic happens in the global economy, it could impact growth in India also, but looking at what it is today, India has got a better chance of achieving that growth because monsoon has been good till now. So agricultural growth will be there. India has got a better chance of achieving something between 8.5% and 9%.
At the end of Q1, you guys were cautiously optimistic, if I can put it that way, with regards to the European and US situation, at this point of time when you are talking to your clients, are you sensing nervousness of any sort which could have a bit of an impact on services growth overall?
Till now, things are good. We are seeing growth coming in but if you look at all the leading indicators from all the large markets, they are too negative. So we have to keep a close eye on that because if the sentiments are bad, it could affect the budgets for IT next year. So we have to balance between the short term optimism and the long term concern that is what we are doing. We are still hiring people, we are still focussing on growth, we are seeing a lot of volume growth coming in, but if the environment continues to deteriorate like this, probably it could impact the budgets for next year & the growth.
Just wanted to know from you what is your ballpark growth numbers for the service sector within the entire fiscal and any particular dampener or any particular situation can actually hamper this growth projection that you have for yourself?
Service sector will do well, probably manufacturing sector is something we have to watch out what is happening globally. So the trend we saw in the services sector in the last few quarters could continue.
Yes, these are great numbers as expected because if you look at globally, there are very few pockets of growth and India is one economy growing at 8% to 9% and 8.8 is what people are expecting. Some of them are expecting close to 9. So these are great numbers.
Most people say that services are bit of a black box for the next couple of quarters as well. It came in at 9.7% in Q4 of course. How do you expect services to pan out because most people are bullish about agriculture, not too bullish about industry. What about services?
Growth is possible, but you have to look at the global indicators also because if you look at globally, all the leading data from the US are too negative, so also Europe. So to that extent if something drastic happens in the global economy, it could impact growth in India also, but looking at what it is today, India has got a better chance of achieving that growth because monsoon has been good till now. So agricultural growth will be there. India has got a better chance of achieving something between 8.5% and 9%.
At the end of Q1, you guys were cautiously optimistic, if I can put it that way, with regards to the European and US situation, at this point of time when you are talking to your clients, are you sensing nervousness of any sort which could have a bit of an impact on services growth overall?
Till now, things are good. We are seeing growth coming in but if you look at all the leading indicators from all the large markets, they are too negative. So we have to keep a close eye on that because if the sentiments are bad, it could affect the budgets for IT next year. So we have to balance between the short term optimism and the long term concern that is what we are doing. We are still hiring people, we are still focussing on growth, we are seeing a lot of volume growth coming in, but if the environment continues to deteriorate like this, probably it could impact the budgets for next year & the growth.
Just wanted to know from you what is your ballpark growth numbers for the service sector within the entire fiscal and any particular dampener or any particular situation can actually hamper this growth projection that you have for yourself?
Service sector will do well, probably manufacturing sector is something we have to watch out what is happening globally. So the trend we saw in the services sector in the last few quarters could continue.
Sunday, August 29, 2010
Major market correction unlikely, good time to buy quality stocks
The domestic stock markets seem to be oblivious to the dire predictions surrounding them about double-dip recession, Hindenburg Omen, and other major predictions of doom. The decibel levels of these predictions increased last week, particularly after an unrelenting parade of bad news on the economy - notably on jobs and housing emanating from the US.
Globally, expectations of a sustained economic recovery are giving way to talk of a double-dip recession. This negative view is compounded due to the fact that the European Central Bank has proposed to postpone the exit from emergency lending measures to 2011, indicating that problems still persist in Europe. The emotional quotient of the market is one of disappointment, and that does lead to sensational headlines on the bearish side.
RBI's view
However, the Reserve Bank of India (RBI) seems to be undeterred by such negative news. Like the stock markets, the view of the central bank was benign as expressed in the annual report released last week The RBI is very optimistic about India's GDP growth being very resilient as has been demonstrated on various occasions like the global downturn of 2008-209 or the domestic agricultural shortfall of late 2009. They go on to say that even now the prospects for the financial year 2011 are extremely bright based on the corporate and consumer durables' sales numbers, and that private consumption demand has grown so much that it almost makes growth self-sustaining. The RBI just wants a good monsoon and better fiscal control for its prediction to come true.
Risks
What the RBI is really bothered about is inflation. Inflation here is a long-term problem. There are many challenges it faces in meeting the inflation targets, as the inflation problem is in the supply side. Hence, the monetary policy has a smaller role to play, while the bigger role falls on the government to mitigate supply constraints.
For supply side constraints to be solved, structural issues need to be addressed. For instance, food production has to be bolstered. Investments in food supply chains have to be made. More importantly, food wastage has to be significantly reduced.
It is reported that India loses $21 billion worth of farm produce after harvest every year because of wastage. Moreover, it has a storage capacity shortfall of 35 million tonnes. Addressing these issues could go a long way in bringing down inflation to lower and stable levels. Apart from inflation, the RBI perceives volatile capital flows as a meaningful risk to the economy.
Investment strategy
Given the two diametrically opposite views - one global and another local -investors are now faced with a dilemma. Should you stay invested in stocks or move your investments to safer avenues such as fixed deposits? There does not seem to be any reason to panic yet. A single Hindenburg Omen signal may be a warning that something is not quite right, but the signal has to be supported by other factors before one can act.
The US stock markets are in a correction mode already and have pretty much been in a correction mode throughout this year. It does not immediately indicate that emerging markets like India have to follow suit. This can be validated from the IMF roadmap alone, which says developing Asia will grow at 8.7 per cent next year as against 3.4 per cent for the advanced world. There is a good intrinsic growth in the Asian region, which will be reflected in the indices sooner or later.
Globally, expectations of a sustained economic recovery are giving way to talk of a double-dip recession. This negative view is compounded due to the fact that the European Central Bank has proposed to postpone the exit from emergency lending measures to 2011, indicating that problems still persist in Europe. The emotional quotient of the market is one of disappointment, and that does lead to sensational headlines on the bearish side.
RBI's view
However, the Reserve Bank of India (RBI) seems to be undeterred by such negative news. Like the stock markets, the view of the central bank was benign as expressed in the annual report released last week The RBI is very optimistic about India's GDP growth being very resilient as has been demonstrated on various occasions like the global downturn of 2008-209 or the domestic agricultural shortfall of late 2009. They go on to say that even now the prospects for the financial year 2011 are extremely bright based on the corporate and consumer durables' sales numbers, and that private consumption demand has grown so much that it almost makes growth self-sustaining. The RBI just wants a good monsoon and better fiscal control for its prediction to come true.
Risks
What the RBI is really bothered about is inflation. Inflation here is a long-term problem. There are many challenges it faces in meeting the inflation targets, as the inflation problem is in the supply side. Hence, the monetary policy has a smaller role to play, while the bigger role falls on the government to mitigate supply constraints.
For supply side constraints to be solved, structural issues need to be addressed. For instance, food production has to be bolstered. Investments in food supply chains have to be made. More importantly, food wastage has to be significantly reduced.
It is reported that India loses $21 billion worth of farm produce after harvest every year because of wastage. Moreover, it has a storage capacity shortfall of 35 million tonnes. Addressing these issues could go a long way in bringing down inflation to lower and stable levels. Apart from inflation, the RBI perceives volatile capital flows as a meaningful risk to the economy.
Investment strategy
Given the two diametrically opposite views - one global and another local -investors are now faced with a dilemma. Should you stay invested in stocks or move your investments to safer avenues such as fixed deposits? There does not seem to be any reason to panic yet. A single Hindenburg Omen signal may be a warning that something is not quite right, but the signal has to be supported by other factors before one can act.
The US stock markets are in a correction mode already and have pretty much been in a correction mode throughout this year. It does not immediately indicate that emerging markets like India have to follow suit. This can be validated from the IMF roadmap alone, which says developing Asia will grow at 8.7 per cent next year as against 3.4 per cent for the advanced world. There is a good intrinsic growth in the Asian region, which will be reflected in the indices sooner or later.
Reff: Economic Times.
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