Fed hike likely in September; India to outperform other EMs: UBS

India, according to him will standout and outperform other emerging markets purely on back of good pick up seen in earnings this quarter.Below is the verbatim transcript of Hartmut Issel's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18. Sonia: How did you read into the US jobs data, were you disappointed or do you think that that was just an aberration and what is your expectations on the Fed in the month of June? A: Payroll numbers were lighter than we had expected but nonetheless, it is not the only number we look at and in this context, I don’t think the report had too much decisive news for us. So on the other hand, the data that was fairly strong, from the one hand the work week. That to me is usually a lead indicator as to whether the labour market demand for it remains strong. So if the work week goes up, it is a sign of it being stretched. The other sign of that also being the case was the wage pressure that you more and more see emerging and at an annualised number of 2.5 percent, it is something that Fed needs to watch. It is hard to say that the report hints us in any which way on the Fed. However, what I do believe is that as we had expected earlier, it doesn’t seem very likely that the Fed is already going to act in June. We think this is anything this labour report gives them a bit more reason to strike only in September.Latha: The US jobs data apart, the Chinese data has looked distinctly weak in May, the purchasing managers' index (PMI) numbers as well as the Sunday trade data and all that has led to the dollar continuing to strengthen now after DXY going to sub 92, we now have it at 94. Is the flow to emerging markets under question, will India perform in this entire contest? A: I think regarding China we are seeing some normalisation. However, same kind of growth momentum is also unlikely to be maintained, even though it will probably hold up at reasonable levels and we will see a lot more data out of China indeed this week, nothing starting with the export data that we just had over the weekend and both data points will tell us more of the story that China is not falling apart and that China is starting to slow a bit but not sharply and this is going to be the trend also probably even for Q3 and Q4 indeed. What it means for me in terms of currencies is that with the Fed, here looking for a slight tightening, we think twice in this year, September and December and that will indeed not on a very good merit scale but on the smaller scale that EM currencies as such should be across the board a bit weaker versus the dollar if we look at the next half year. Latha: You don’t see any danger to EM flows, that was my basic question with metals beginning to fall a bit although crude is holding, this entire commodity story for which you saw flows coming into EMs, is that still on or do you think people will start questioning EMs again? A: I think people are already starting to question that to some degree. In my view, India might stand a bit out on that because we have on the earnings front, which is not so much commodity driven. So on eargings front, we will see a couple of turning points also on the banks that is very important for India of course after the asset quality review (AQR) which seems to have been very frontend loaded into Q3 and Q4 fiscal quarter by the Indian calendar. So basically, by March they have flushed most of this extra non-performing asset (NPA) recognitions through their profit and loss (P&Ls) and these are couple of sectors why I think EM managers will identify India standing out clearly from a corporate earnings growth trajectory.