May 14, 2012, 02.19 PM IST
Although investors are still cautious on global equities, Jason Pidcock of Bank of New York Mellon believes that they are relatively comfortable about Asia.
"Most investors are relatively comfortable about Asia. Growth remains high in Asia than in other parts of the world," he says in an interview to CNBC-TV18.
On India, while he isn't too bullish at this point in time, he says there are other countries in the region which are much more attractive. India is losing out to some of its Asian peers and his top bets in this region are the Philippines, Singapore, Malaysia, Thailand and Indonesia.
Since he isn't a big fan of India from a top-down perspective, bottom-up he is betting on the healthcare sector. "I would say it is lower risk with a multi-decade story," says Pidcock.
In his view, the concerns in Europe, the extent of the slowdown in China, and what happens to the oil price are three big considerations which will keep global markets under check.
Below is the edited transcript of Pidcock's interview with CNBC-TV18. Also watch the accompanying videos.
Q: What would you say is the position of your key investors towards the issue right now? Would you say they are still in a cautious frame of mind or are they beginning to exude any confidence?
A: I think investors are still quite cautious in a general global sense but most investors are relatively comfortable about Asia and they do see the growth there remains higher than other parts of the world. Even when I look at the emerging market space, they are relatively comfortable of Asia and even if there is a little bit more cautiousness in China at the moment, people can see South East Asia and other markets looking healthier.
Q: Are you seeing that translated into a lot of money flows into your funds? Is that typically coming through the ETF kind of vehicle?
A: We are getting money in but most of it is coming through the income fund that we manage. Lot of people particularly in this country are struggling to find income providing assets classes whether it’s your government debt or bank deposits. The yields are very low. So, if they can find high yields in an equity portfolio and if they want to diversify their geographic or currency exposure then an Asian Income fund can look quite appealing. We have one with a yield of about 4.9%.
Q: What are your thoughts on Asian currencies this year because the rupee has had a bad start of the year? Do you see that kind of depreciating trend continuing?
A: The rupee has struggled for understandable reasons; the political situation in India isn’t healthy from a capital flow point of view. The high oil price, higher than comfortable inflation hasn’t helped the budget deficit and we have seen some weakness in other currencies. The dollar has been relatively strong year-to-date compared to other years and in a rising dollar environment or even when it just stops falling that could be difficult for countries like India which are quite reliant on capital flows.
We have seen reasonable firmness in the Australian dollar and so it has extended across the whole region and countries like Singapore where they have more control over their currency will use that to come down on inflation which at the moment is about 5% and in their eyes too high. It is a bit of a mixed bag. Of course the Hong Kong dollar we expect remains absolutely flat against the US dollar while the Chinese currency we think will be pretty flat against the US dollar this year as well.
Q: Do you share the markets concern about India's macro at this point, the huge current account deficit, etc?
A: Yes it is daunting; there is no easy way out of it. Obviously if commodity prices slump or at least trend down, that will be to India's advantage but I guess you could argue that India has been crowded out to an extent by China and its struggling to get on top of things and therefore there is a lot that's outside of India's control.
It doesn't have the same global supply chain in place that China has, it’s perennially running this budget deficit and when overseas investors are a little less comfortable about the reform agenda in a country, that doesn't help either. In the last year we have had a couple of disappointments particularly on the retail laws, allowing and then deciding that external retail companies wouldn’t be able to invest in India in the way that the market was hoping.
Q: Is that your positioning in India as well, slightly underweight and not quite too bullish at the point?
A: Yes, it doesn’t look desperately cheap. We know what we could like to see that would help but at the moment the better looking stocks, which generally are the domestic consumption stocks don’t look overly attractive. There are other countries in Asia that look a little bit more exciting at the moment.
The Philippines for example. Politically Philippines have improved massively over the last couple of years. They are really trying to clamp down on corruption. There is real buzz in that country and we are seeing a lot more growth opportunities and India has to compete in the minds of global and regional investors with other emerging countries.
Q: Are you saying in a relative world India is sort of losing out to some of its Asia peers at this point?
A: Yes, you could say that in the last 64 years, India has suffered from the most corrosive of British exports. One Britain has done a lot of damage to India in the last 64 years and it is going to take a long time for that to unwind. There is too much government interference in the Indian economy and it is holding the whole country back.
Intermediate top in Nifty is probably in process. Markets may move towards distribution or correction; Monday may have seen an exhaustion gap in Nifty
ALL GOOD THINGS COME TO AN END. The rally in Nifty which started from 5975 and touched 6415 may now be coming to an end. Fresh buying should be done only after some downward movement in prices has taken place.
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