forty,000 goal for Sensex: Morgan Stanley

Posted On Jul 25, 2020 By admin With Comments Off

What has done in order to constitute India more accessible to FDI and portfolio financing are important developments, but the stability of the financial system is more crucial, says Jonathan Garner, Chief Asia& Emerging Market Strategist& Chairman of Asset Allocation.What is the kind of earning revision directions that you have been looking at and where does India stand right now? How are you assessing the current situation based on the kind of earnings and commentary that we have been seeing? If you look across our coverage, what is very pronounced by market was just the way that the earnings estimates in north east Asia, especially China, Korea and Taiwan, have turned out more rapidly and to a greater extent than those elsewhere in our coverage macrocosm. In India’s case there is an improvement and in terms of earnings revision breadth, it is more in the middle of the bundle. Latin America in particular is lacking and that is reflected in the performance of Latin american countries. Given that you are seeing some improvement and the fact that we continue to see fairly strong liquidity post central bank action globally, do you expect Indian markets to tend higher from here? Is there fairly interest opening or are valuations starting to look overpriced? Again, it is in the middle of the bundle and we have given an equal force recommendation. We could see Sensex at around 40,000 again if all goes well, but we continue to have greater upside particularly for the China equity indicators and must notably the Asia Index. One of the things we are monitoring is liquidity and retail investor feeling. When you look at account openings, boundary, futures trading and vast money growth — all that is stronger in China and Korea than in India and specific areas of Latin America and East and Middle East Africa. In words of reforms or structural moves from the authorities concerned, was something that you would have liked to see from India? There has been so much talk of India taking advantage of the present pressures between US and China, but Chinese groceries continue to be front and centre when it comes to this part of the world. What more could India do to create more resistance here? One of its most important things that we have been consistently emphasising in recent years is credit creation and in getting public sector organizations banks in a better shape. There has been some action but we too had a shadow banking credit crunch in India. It is really important for the overall economy and earnings to move forward, but you have a more stable and continue informant of recognition for businesses and households and that is probably the single most important thing. It is not to underestimate what has been done in terms of starting India more accessible to foreign direct investment for example and portfolio speculation. These are important developings but I think it is the stability of the financial system that is crucial. The business globally might meet a sharp come, perhaps from October. What are the risks that you ascertain? Yes, we have got a US presidential election cycle and the markets in the US can be weak in the two or three months running up to that and that will obviously be in November. We have gone through clearly a very sharp recovery in markets and so it is really important to monitor whether earnings do come through. That is good news in that sense but US and European earnings repetition has begun relatively well and we plainly have US-China strains and that needs to be monitored very closely, but we have come a long way in a short time. Markets for the overall EM index are at about 4-5% above our indicator target. We are certainly not in an environment where we would be recommending a strong buy right now. What could run a risk for India because sporadically some of the states are entering into miniature lockdowns. Do you be understood that as increased risk and could that actually constitute a threat to the 40,000 target that you set out for the Sensex? Oh! Yes it certainly could and we are monitoring the lockdowns and interruptions to economic act very carefully. The nationally lockdown has stopped not only in India but in the majority geographies. We are seeing a extremely conflicting pattern in areas of new Covid cases and the pressure on the economy and on consumer interests. Again broadly speaking, Latin american countries, East or Countries of the middle east, Africa and South Asia are performing less well than Northeast Asia and that is a very declared difference in relation to Covid. With have referred to impending US polls, one insures the dollar weakness playing out especially in the dollar connected resources. In subject of prized merchandises, amber has hit a nine-year high, silver-tongued is at a seven-year high already. Do you verify the dollar slacken further closer to the US election? We certainly have been arguing for a weak dollar, particularly against the Euro. We had this Eurozone recovery fund which is again very important structural proliferation and the dollar is obviously affected by Fed policy. More than the US election cycle and if you look at long maturity real interest rates in the US, what you see is that the 10 -year maturity real interest rates are at around minus 90 bps and those real interest rates are going further into a negative territory. That tells us that the markets are expecting the Fed to be even more stimulative and actually the phase of certain growth environment in the US and that is likely to weaken the U s dollars. It is said that every repetition and every crisis causes a new opportunity but what we have seen in global markets and regional marketplaces that the previous champions have only become the outperformers like the US Tech fellowships, Indian consumer firms, selective private banks. Do you think the trend of this mega cap absorption is a global phenomenon which will last for the next got a couple of fourths? Jonathan Garner: Certainly. The impetu points are exceptionally strong globally. It turns out that many of the business models that were already doing well particularly in the e-commerce, internet seat. For lesson, select shopper transactions are doing even better in this work from residence environment and so it is important to monitor valuations. If you look at growth stocks, relative to value broths they are at all-time high valuations. So, “thats really not” back to value stocks. Industrials, vitality materials and overall fiscals would be linked to how strongly economic recovery may be as we go into 2021. Rising real interest rates generally cure quality assets to better and you might get some gyration out of growth stocks. Given that right now the world narrative is against China, do you think world-wide investors could relook at reducing their weightage towards Chinese equities in general? For world-wide investors who follow MSCI benchmarking, China has a very large position but frankly the narrative for Chinese manufacturing companies, Chinese internet companies and Chinese banks is not all that enormous? Global investors has already been been increasing. They are underweight on China in recent months and in fact they are less below standard than they have been at any stage since 2009. That is related to the better fiscal operation and better earnings revises structures that we are seeing. In that gumption, investors are not expressing a significant concern on US-China strains. Nonetheless, we recommend revelation to Asia’s where foreign investors are much less of an important feature of trading volumes rather than the US rostered ADRs which would be more at risk if there is further escalation of US-China hostilities.