Seth Freeman, EM Capital Management is not sure that the outcome of recent election in India would bring inflow from foreign investors as such. However, he says if there are some meaningful announcements from India on infrastructure side then there is lot of long-term foreign direct investment (FDI) waiting on the sidelines to come in.
Among the emerging market, he is closely watching Mexico because it has announced opening of oil industries and there is talk of manufacturing shift out of China into South Asian locations and into Mexico.
Moreover, he cautions that although the headline jobs numbers look good, it could be seasonal hiring ahead of Christmas and there is still 7 percent unemployment so one should not get too excited about them.
US employers hired more workers than expected in November and the jobless rate fell to a five-year low of 7.0 percent, heightening expectations the Federal Reserve will soon start ratcheting back its bond-buying stimulus
Below is the verbatim transcript of his interview on CNBC-YTV18
Q: When is taper likely to come about and what is the quantum you are looking at?
A: We might see overall exuberance from the employment figures but I wouldn’t get so excited about them. We still have at least 7 percent unemployment. There has been quite a bit of seasonal hiring that we have in November in anticipation of Christmas.
The Fed is on the mark in terms of analysing the types of jobs that have been gained and they are generally low paying jobs. So, I don’t think just the headline numbers are going to tell us very much.
Q: You also track the Indian market very closely and this morning all indications are perhaps that we could see fresh all time high because of the way the state elections verdict has panned out. What is the sense that you are getting and what is the sense that global investors are now getting about what the way forward could look like?
A: I don’t know frankly to what extent foreign investors are really following the elections at this point. I imagine that some are but many others are looking at India’s immediate macro situation. So, if the market goes up over the next couple of days because of domestic enthusiasm then I catch the attention of foreign investors. I am not sure just based on the elections we are going to see new foreign money flowing in other than those seeking to leverage the momentum.
Q: When exactly do you expect taper to come about? Are you expecting in December and among emerging markets which are the markets you are watching out, which would be hit and how would they react?
A: One emerging market that is getting a lot more attention is Mexico. Mexico at the end of last week announced for the very first time in half a century its opening up its oil industries because there has only been one national oil company Pemex. I think that is going to get a lot of attention.
Secondly, over the last two years there has also been a lot of enthusiasm for shifting manufacturing out China and certain South Asia locations back into Mexico. So, I would watch Mexico.
If India could make some meaningful infrastructure announcements I actually believe there is quite a lot of foreign direct investment (FDI) on the sidelines and private equity money which is very good because it is long-term money and not portfolio flows waiting to enter India.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
