Next year – 2017 – will continue to be a roller coaster ride for the emerging markets (EMs), believes Rob Subbaraman, Chief Economist, Asia-ex Japan at Nomura.
It will be a risk-on and risk-off environment for the emerging markets (EMs).
While inflows will come in, growth continues to be subdued from most of the EMs, he told CNBC-TV18 adding that growth opportunities like in South East Asia and India.
However, corporate credit risks are prevalent, which could be a restraining factor for the inflows. EMs are also fairly leveraged with rising debt, which adds further strain.
“On a global scale, India is holding up pretty well,” he says, referring to the economy’s growth. In near-term, Subbaraman expects inflation to go down and consumer price index (CPI) to fall below 4 percent.
The Reserve Bank of India (RBI) under the new leadership and new committee policy seems to be turning more dovish than before. The main concern for him is the underlying inflation, which is not likely to fall much over the long-term.
The Pay Commission and the Goods & Services Tax (GST) Bill will add to inflationary pressure.
Globally, Nomura expects metal prices to fall as the rally is now on its last leg. Oil prices, Subbaraman says, are not likely to rise much from current level, but won’t fall sharply either.
The upward commodity prices and rising inflation is pushing the dollar index up. Rupee, amongst Asian currencies, continues to be one of Nomura’s favorite.
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