“The major support for markets in Asia in the second half of the year could come through a weaker dollar,” Mathhews said.
India is unlikely to outperform other emerging markets because valuations in India are expensive relative to its peers and expensive relative to its history, said Mark Matthews, managing director, Bank Julius Baer & Co. However, he is upbeat on Asia in general, including India, and does not think things are bad for the region even in China. “The major support for markets in Asia in the second half of the year could come through a weaker dollar,” he said in an interview with CNBC-TV18.
Talking about the Union Budget 2019 in India, he said they would closely watch potential for more stimulus in the rural sector because, after the last election in 2014, the government was not in a position to do a lot of spending because inflation was high. That, in turn, was putting pressure on rupee. But, now, there could be more stimulus for the rural sector.
He would also like to see what is there in terms of corporate tax and capital gains tax from the budget.
Talking about the issues in some of the non-banking financial companies in India, it is unlikely to be a systemic issue because, although the NBFCs have taken advantage of banks not being in a position to do much lending over the last few years, the scale of NBFC lending is still small to the entire system. “I don’t see it as being a systemic issue the way it might be in other countries like China, for example,” said Mathews.
It is impossible to forecast what will come out of the G20 meeting in Osaka, said Matthews. “If I had to guess, I don’t think it will be successful because, on the American side, I think Donald Trump secretly hopes there is no deal because he really wants tariffs to be in place to bring back jobs to the US. I am not sure if the Chinese want the deal either because, although it was very scary for China last year, their economy has ironically stabilised now, and their President Xi Jinping has become a hero to his people because of this fight with the US,” he said in the interview.
Matthews said he doubted if there was going to be a deal. And, in that case, central banks will keep their interest rates low, and governments will do more fiscal spending. "So even if the global growth is slow because of protectionism, I think people will still want to buy assets, especially assets that have yield,” he said.
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