According to Stefan Hofer of LGT Bank (Hong Kong), the investment case for India has not changed. "Setbacks and profit taking are always a risk – but we think that the economic growth outlook for India is more than sufficient to warrant an Overweight stance," the managing director and chief investment strategist said in an interview to Moneycontrol.
On the ongoing rate cut cycle in the United States, the Swiss native believes there is a theoretical risk that the Fed will be forced to pause the rate cycle in the second half of 2025 if the entire Trump economic platform is enacted.
Do you expect the fiscal deficit to remain high during the Trump administration? Would this be a negative for the US dollar and a positive for emerging markets like India?
The Trump agenda of tax cuts promises higher deficits over the coming years. The combination of his proposed policies actually points to a stronger US dollar, in our view. This implies downward pressure for EM currencies.
Do you think the US Federal Reserve will go slow on interest rate cuts, given the good economic progress and substantial easing of inflation?
There is a theoretical risk that the Fed will be forced to pause the rate cycle in the second half of 2025 if the entire Trump economic platform is enacted.
Do you foresee any intervention by Trump in the Federal Reserve’s interest rate decisions once he takes office as President of the United States in January?
We can imagine that there will be public commentary about Fed policy by President Trump, but we don’t think he will go so far as to remove Chair Powell.
Which themes are you bullish on in India? Have you increased exposure to those sectors during the ongoing market correction?
We advocate that international investors take on a broad exposure to the Indian market, alongside our other two favourite regions, the US and Japan.
Do you think the froth in valuations has come off considerably in India after the recent correction, or do you expect more selling pressure in the coming weeks before stability returns?
The investment case for India has not changed, in our view. Setbacks and profit taking are always a risk – but we think that the economic growth outlook for India is more than sufficient to warrant an Overweight stance.
Do you see pockets of opportunity for India if Trump renegotiates tariffs with China?
It is too soon to argue that “China’s loss is India’s gain”. Rather, we think over the coming decade, international supply chains will be re-wired so that they are less reliant on China alone, but the arena of manufacturing exports is highly competitive.
Are all asset classes less concerned about geopolitical tensions in the Middle East now?
The primary avenues where geopolitical tensions are expressed in markets are in Gold and the Oil price. So long as oil supplies from the Persian Gulf are not impacted, then the impact on other asset classes tends to be muted.
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