Indian equities to support Asian markets as macro conditions improve: HSBC's Van Der Linde

HSBC ‘s chief Asia equity strategist Herald Van Der Linde has said China's re-emergence does pose a risk but earnings growth should help Indian firms with inflows.

Indian equities will continue to show strength on the back of strong earnings as well as easing of global macro conditions and 2024 will be a good year for the market, Herald Van Der Linde, Chief Asia Equity Strategist, at HSBC said on November 23.

In an interview to CNBCTV-18, Van Der Linde also said global macro conditions had improved compared to the past two years, as bond yields cooled.

“Soft landing in the US is a more reasonable assumption. The bond yields have come down from the high of 5 percent to 4.4 levels, which is a substantial decline. The market has already priced in lower interest rates and we expect to see confirmation for this by February or March next year,” he said.

India’s growth story would continue on back of earnings growth and improving global conditions.

“India is a great example of earnings growth across the Asian region. Maybe not as much as this year, but 2024 is expected to hold up reasonably well and will support the Asian equities as well,” he said

The core of the story was that for the Asian equities and Indian equities, the global macro conditions had been negative over the last two years but were now moving in their favour, Van Der Linde said.

Investors might focus more on domestic-oriented sectors as export segments like the information technology segment, would continue to have indifferent growth outlook.

The IT companies have taken a beating with rising interest rates forcing companies in the US and Europe, their biggest markets, to scale back spending. Fears of a recession and a slowdown have not helped either.

“As long as we can avoid this recession story, the growth outlook for exporters, which the IT sector in India is, might be muted. It's not going to be strong next year but it's not going to be extremely bad either.

“I think next year we probably going to move a little bit more towards the domestic-oriented sectors across Asia. Probably India is not going to be a large exception to that,” Van Der Linde added.

He said that the healing of sentiment towards China could pose a challenge to India, though the Indian companies earning growth was strong.

“I think that (China’s reemergence) is a risk for India. So if you look for example the Chinese internet names that are trading in Hong Kong, they have just performed very well. They are really sensitive to these lower bond yields. So, when the global macro improves, that supports China a little bit more than India in the near term. But, as I said, eventually it's going to come down to earnings as well. There I think the story in India is going to be better” he added.