India looks more attractive than China: StanChart Bank

In an interview to CNBC-TV18’s Latha Venkatesh & Sonia Shenoy, Steve Brice, chief investment strategist of Standard Chartered Bank spoke about the global market and his outlook on Indian equities.  Below is a verbatim transcript of the interviewLatha: How are you estimating the problems out of China? There is another company probably defaulting on its bond. What will the ramifications be for China and for the rest of Asia?A: A lot of bad news is already priced into the Chinese market to some extent. Look at the valuations there, they are depressed, that is distorted significantly by valuations regarding the banking sector. So, from a macro perspective we are not bullish on growth in China, we are looking for 7-7.5 percent but we certainly do not believe they are to get the below that and indeed in recent times you have seen them back track a little bit on tightening credit conditions by allowing short-term interest rates to come down; just highlighting the challenges that they are facing. I think it is unlikely to be positive for the region but it is unlikely to be much negative from here because a lot of that is bad news is already priced in.Sonia: From an equity market perspective do you see incremental money move out of China and into a market like India—a thesis that has been proved before as well?A: Yes, there is lot of momentum behind the Indian market now and obviously since making new highs. It is an important feature. The short-term outlook looks very favourable for India versus China. There are some longer term negatives in terms of the Indian markets but overall sentiment at the moment looks pretty good. I think the election is going to be the key and I also still believe that there are two external factors; yes, India’s trade balances now at significantly but it is still significantly negative and therefore the US rate hiking cycle is focused on tapering so far, we believe it is moving towards tightening in 2015. So that at some point is going to be a bit of a headwind. Near term we believe that the Ukraine situation is also going to be challenging as well. So, momentum is strong but there are some risks out there. We are not excessively concerned about the Ukrainian situation from a market perspective. It doesn’t seem to be the willingness to take too aggressive action against Russia in Ukraine. So, from market perspective unlikely to be that much of an issue but turkey still, a lot of political concerns coming out there from a very fragile fundamental positions, so we are watching that closely.