India most attractive among emerging markets: Citigroup
Our Corporate Bureau
18 August 2006
Hans Goetti, director, Citigroup, says that fund flows are coming back into emerging markets. He says that the Fed is near the end of the tightening cycle, however they may hike rates by another 25 bps later this year.
According to him, India is the most attractive among emerging markets. He says that India is not cheap, but attractive to long-term investors and has a favourable composition of imports.
He further adds that India's current account deficit as a percentage of GDP is lower than other emerging markets, but the RBI has acted well to contain inflation. CNBC-TV18 shares with domain-b its exclusive interview with Goetti:
Are you feeling a bit more comfortable about equities generally after what has transpired in the last three-four weeks?
It is absolutely right to say that the risk premium has receded somewhat and investor optimism has returned to a certain degree. We are particularly bullish about matured markets such as the US and Europe as well as Japan. We have started to get a bit more bullish on emerging markets, we see some fund flows coming into emerging markets and I think that is quite encouraging.
Has the call on global interest rates changed in the light of the last Fed meeting? What has come through after that, or does it still remain quite indeterminate for you?
As far as the US rates are concerned, the Fed is obviously near the end of its tightening cycle. We may see another 25 basis point increase, maybe not by September, but a little later. At the same time, the European Central Bank and the Bank of Japan are tightening policies, but I think the Fed here is the key factor.
If the Fed stops raising rates, the US economy, which we expect to slowdown in the second half, may actually engineer a soft landing. And that will also be extremely good news for emerging markets.