Fed still has wage, inflation worries: Hans Goetti

Hans Goetti, Head of Investment-Asia, Banque Internationale is also of the opinon that Fed will not hike rates just because US jobs data has shown growth. Other key factors like wages and inflation are still very low, and untill those show some upticks, chances of a rate hike is a distant possibility.

Below is the transcript of Hans Goetti's interview with Sonia Shenoy & Anuj Singhal on CNBC-TV18. Anuj: Is the market making heavy meal of US jobs data where its is expected the rate hike will be sooner than expected. Specially the way Indian market and couple of other emerging markets are reacting? A: We are not convinced that this improved jobs number or the one that is above expectations will lead to a Fed hike earlier than expected. What the Fed wants to see obviously is jobs growth and this is what we are having but at the same time they also want to see wage growth and that’s still lacking. As long as we don't see wage growth the Fed will not hike rate, it is as simple as that. They are also looking at inflation which is still not where they want it to be. So, we do not think the Fed will raise interest rates sooner just because of this number.

Sonia: This year so far has been extremely strong for global markets, US market hitting record highs everyday and Europe on the cusp of recovery as well. What is your assessment of equities in 2015 and what your pecking order would look like? A: We still have tailwinds from central banks. Yes, the US has stopped its QE programme but every other central bank on the planet is on QE whether it’s the ECB, the Bank of Japan, the Peoples Bank of China, all this is very supportive. In India you will have an environment where interest rates are coming down, so overall from a strategic perspective we are overweighting equities over bonds, bond as an asset class is overvalued in our view with few segments there are attractive but in general overvalued and we put our money mainly in European and Japanese equities at this point, in the developed markets.

Anuj: So far the Indian currency has been resilient but today we have seen a big impact. If the dollar index goes pass 100 maybe even 110, do you think that could put quite a bit of pressure on the currency and that in-turn would put some pressure on the stock market as well? A: Indian rupee has been one of the stronger currencies. It’s the whole emerging market complex somehow is adversely affected by strong dollar – that’s clear but Indian rupee has been extremely resilient and we expect this to continue because India is attractive for international investors because we are talking about new environment. It’s a growth story, it’s a rerating story and it looks like we are going to see the revival of an investment cycle and that’s what is going to drive the Indian economy in the next few years.