Morgan Stanley's Jonathan Garner on Indian market, euro zone uncertainties
Minutes after the People's Bank of China cut its official rate by 25
basis points for the first time since 2008, Jonathan Garner, Chief Asian
and Emerging Market Equity Strategist at Morgan Stanley, shared his
views on the implications of the euro zone's uncertainties.
Jonathan Garner, Chief Asian and Emerging Market Equity Strategist at Morgan Stanley<em>:Bhaskar Paul</em>
Minutes after the People's Bank of China cut its official rate by 25 basis points for the first time since 2008, Jonathan Garner, Chief Asian and Emerging Market Equity Strategist at Morgan Stanley, shared his views on the implications of the euro zone's uncertainties, the way ahead for emerging economies and other matters with Rajiv Bhuva. Edited excerpts:
On euro zone turbulence: The euro zone has significant problems in its banking sector. Europe needs to move towards a banking union model over time, and ultimately a fiscal union. Emerging markets need fiscal and monetary easing for which they have enough scope
On India's problems: Low oil prices would help India in this situation. But what really needs to happen here is more government delivery, particularly on infrastructure spending, mainly ports and transportation.
On the state of the Indian market: The Indian market is paying the price of macro mismatches. The twin deficits - fiscal and current account - are a significant risk issue. The large current account deficit with its macro imbalance poses significant currency risk. We have been underweight on India over the last one year and are still looking for a third of valuation adjustments. The relative valuation premium for the rest of the emerging markets has come down from 60 per cent to 30 per cent. We do not see any particular reason why India should trade at a higher valuation premium relative to larger emerging markets.
On euro zone turbulence: The euro zone has significant problems in its banking sector. Europe needs to move towards a banking union model over time, and ultimately a fiscal union. Emerging markets need fiscal and monetary easing for which they have enough scope
On India's problems: Low oil prices would help India in this situation. But what really needs to happen here is more government delivery, particularly on infrastructure spending, mainly ports and transportation.
On the state of the Indian market: The Indian market is paying the price of macro mismatches. The twin deficits - fiscal and current account - are a significant risk issue. The large current account deficit with its macro imbalance poses significant currency risk. We have been underweight on India over the last one year and are still looking for a third of valuation adjustments. The relative valuation premium for the rest of the emerging markets has come down from 60 per cent to 30 per cent. We do not see any particular reason why India should trade at a higher valuation premium relative to larger emerging markets.
