Prefer India over China on a long-term basis: Manulife AMC

The US economic indicator released on Thursday is not strong enough for the Fed to hike rates, believes Geoff Lewis of Manulife Asset Management. "World trade growth is very depressed now; however, yields may be 20-30 basis points higher by the year-end," he told CNBC-TV18. According to Lewis, risk-reward ratio is in favour of emerging markets (EMs) against developed markets. Among the developing nations, he prefers manufacturing-based markets over commodity producers of Latin America and US equities over European, in the developed markets, he added.On a long-term perspective, Lewis is bullish on India over China while on tactical basis, he prefers markets the other way round due to high valuations.Below is the verbatim transcript of Geoff Lewis’s interview to Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Sonia: You told us what your preferences in developed markets and your preferences in emerging markets. But what about the argument of who will perform better between developed and emerging markets. I was just reading a blog that Mark Mobius put out early this morning where he said that the year-to-date (YTD) emerging market equities have outperformed developed market in dollar terms by quite a bit. MSCI EM is up almost 14.5 percent. Do you expect this outperformance of emerging markets to continue over the next six months?A: I think it is likely we might see a little bit more outperformance but we will see a pause now. There have been good reasons why there should be some catch up but are we out of the woods, are we looking at a really strong recovery now in Asian and other emerging economies. So, I don\\'t think so. Look at the world trade growth, it is still very depressed. Look at the Purchasing Managers\\' Index (PMI) and the export numbers, they are better than they were at the start of 2016 in terms of momentum but they are still pretty patchy across different countries. So, we have to be very selective. The move to eliminate the underweight in emerging markets was justified but it is not going to be off to the races. As to the charge between the developed and the emerging markets we were arguing in what we have been saying and publishing that is the risk to reward ratio had definitely moved in favour of the emerging markets. We have seen quite a lot of that performance rebound for the short term but in the longer to medium term emerging markets is going to be where the growth is going to be.Sonia: Your quick view on India as well. I know you have been bullish on the Indian markets for a while but at this juncture do you expect a pause here too?A: I would think something of a pause. Yes, on a tactical basis we would look more to gains in China as sentiment was far too negative earlier this year. The economic data is coming in a little bit better than expected and the financial risks in the short term have been exaggerated. The India story is still good but the valuations are little bit high. Foreign portfolio investors they seem to regard India pretty much as a core holding that money seems to be a little bit stickier. I don\\'t expect that to change. So, long term I would favour India over China but on a tactical basis it would go the other way.Latha: Any other red flags other than the Fed?A: Obviously there is the US presidential election. Markets are just not good at pricing binary outcomes and some of the weakness has been due to the shift that we saw in the polls over the last months.