India a prime growth mkt; see better H2FY16 earnings: JPM

Sonia: We have been through a lot of volatility in terms of global cues in the last couple of weeks. What in your mind is the one big global cue that we should continue to worry about and how do you expect global equities to pan out for the rest of the year? A: In the short-term we had the Greek situation lingering on, and clearly last week the main focus was on the Chinese A-Shares market due to the sharp correction. In the medium-term investors are focusing on the US interest rate normalisation. Now looking at the impact of the Greek debate, we are pleased to see that the financial markets have been isolating Greece from the rest of Eurozone, in the sense that the reaction in the financial markets has been quite muted which we think is logical. Greece is well ring fenced. We have known this problem in Greece for the last five years so most of the debt in Greece is owned by public entity and any private investors who are still in Greece should be fully aware of the macro headwinds, and various issues that the government needs to address.

In terms of A-share market, we were expecting some correction in A-shares market given the sharp rally we have seen in the past. Valuations have gone into rather extended territories in certain parts of the market. With the correction the market, the government seems to have taken the view that the correction needs to be dealt with by controlling or balancing the supply and the demand. So they controlled the supply side which seems to have calmed the market. So now the government has demonstrated that they can put a floor in the market. Obviously we would rather see more liberalisation in the stock market in the long run but at the same time given that most of the retail investors - A-shares market is dominated by retail investors and many retail investors are still new to the stock market, they are not use to seeing volatilities like this. So calm in the market is probably a sensible option.

Latha: Where does India figure in your pecking order in emerging markets and will that order change because of China's stock market bubble or because of Greece?

A: When we look at companies in India, we see many compelling structural growth names, India is a good rouse high quantity businesses we can analyse within the emerging markets. We think India is a prime growth market, good combination of quality on growth. However, having said that, we need to be disciplined about valuations. So when it comes to valuations, India is trading at premium to the overall emerging markets. So we need to be selective here but India seems to be much better positioned for the upcoming interest rate normalisation compared to the initial taper tantrum. So we take that as a positive too.

Earnings momentum have been rather slow to come back but we think that in the second half we should see better earnings coming from Indian corporate. So we are again nibbling into ideas. We like domestic cyclical areas in India in particular because valuations look relatively attractive. So India is a quite good market for the medium-term quality growth and we are looking at valuations to be selective in India.

Sonia: What is your top three in terms of the markets to invest into for the rest of the year?

A: In terms of relative valuations, Chinese H-shares, we invest in H-shares rather than A-shares, still seem to offer reasonably good value but in China we also want to be quite selective. For example, we can find names that are giving good yields, or names that are giving good growth like internet names. China is a big market, so we can be quite selective here.

We also like India for quality growth exposure and India's macro backdrop seems to be best among the so-called fragile five countries, compared to 2013. So we like that. So India is a solid market in the second half. We also like Taiwan mainly technology companies which have interesting earnings growth profile benefiting from the global supply chain bottoming out. So Taiwan is another area for stock picking.