Prefer China over India; early tapering unlikely: Finaport

Hans Goetti, Finaport is of the view that equities in general, both for the developed and emerging markets have further to go for the next few months mainly because tapering by Fed is unlikely to March 2014. So, the liquidity driven rally will continue, he adds.

He is bullish on China not only on back of reform drive but also from a valuation perspective. "From a valuation perspective Chinese equities are extremely attractive. We are talking about single digits in terms of price-earnings ratios, whereas the long-term average is around 12.5 times for China." says Goetti in an interview to CNBC-TV18 India, he says will hold up well as long as QE continues. However, he is neutral on India and at this point in time prefers China over India. Domestic oriented sectors in India look most attractive, he adds. Also read: Nifty may take out 6330; Re support at 60.50-61.50/$: Gibbs Below is the verbatim transcript of his interview on CNBC-TV18 Q: Could you tell us the impact that economic reforms that have been unveiled by China will have on the Asian markets? We got a few notes that perhaps China will rerate and therefore the other Asian markets might lag. What would your view be? A: China is probably the most important market in Asia. It is one of the biggest economies in the world, so it is very important what is going on there. My take is that it is positive. The reform drive is for real it seems. What you have is probably more political centralization, and more economic liberalisation at the same time. How this will reconcile this in the long run is unknown, but for now, just the idea that reforms are being pursued and hopefully implemented is a positive and it should be positive for Asian markets. Q: What is your call on emerging markets? Do you think the last couple of weeks were in hindsight a buying opportunity? Do you think this liquidity driven rally will continue for some more time? A: Liquidity driven rally will continue, not only for emerging markets, but for developed markets as well. Janet Yellen seems to be more dovish than Bernanke and she is a strong supporter of an additional Quantitative Easing (QE), so I think tapering by the Fed is off the table right now. Again our call is that it is going to be March at the earliest with the consensus there, but even then it will remain data dependent. So what you have here is clearly green light from the central banks and in the case of emerging markets of course which are the biggest beneficiaries of QE there could be some positive developments ahead, especially in the light of the fact that valuations in emerging markets are extremely attractive compared to the developed markets. However, we still think equities in general, both developed and emerging should have further to go over the next few months. Q: Do you think the economic policy reforms that have been announced can rerate the Chinese equity markets and therefore in that context emerging markets like India might underperform the other Asian equities? A: We are very bullish on China, because of this reform drive, as well as valuation. From a valuation perspective Chinese equities are extremely attractive. We are talking about single digits in terms of price-earnings ratios, whereas the long-term average is around 12.5 times for China. So there is upside from there and of course we had a huge drop since 2007, some sideways movement. So we think that the stage is set for the Chinese market to do better in the months ahead. Q: In terms of India what would your call be and within India what kind of sectors would you prefer? A: India could be attractive again and as long as QE continues India will hold up pretty well. The next step will be with a view to the election next year. As far as sectors are concerned, I would think the domestic oriented sectors for us look the most attractive. Q: Do you recommend buying the Indian markets at current levels? A: If you put it into the context I would think we are probably neutral on India, we will prefer China at this point in time. Among the Asian markets, I think India is somewhere in the middle of the pack, so we have a neutral position on India right now.