ET NowIn a chat with ET Now, Mark Tinker, Head of AXA Framlington Asia, AXA Investment Managers Asia, shares his views on the emerging markets and the Indian economy. Excerpts:
ET Now: Do you believe that what is happening to India or some of the other emerging markets is year-end position booking and maybe that will stop once December is over? Is that the correct analysis?
Mark Tinker: It is certainly. What we are seeing across the Indian markets is year-end positioning. So we have to be careful not to read too much long-term trends into that. Back to winning ways? Well, one has to be a little bit careful and I think it is back to fundamentals. We have had a lot of momentum and India obviously in the first half of the year had a tremendous performance. It is still one of the best performing markets out there, but most of the performance is down in the first six months.
The last three to six months have been reasonably flat and it is really China that has taken off. So it is almost like the baton has been passed on from India to China. But I have to say when we look at that famous acronym of BRICS, the 'B’ and the 'R' -- Brazil and Russia -- as effectively raw material energy producers are going to struggle whereas the 'I' and the 'C' -- the consumers India and China -- are in a much better position as a result of what we have seen develop over the last six months in commodities. But it is not all plain selling and the big worry I would say is we must watch the dollar. If you are not going to get a hold of dollar debt, you are going to have a pretty tough 2015 unless you can restructure that.
ET Now: India is a consumer of oil in the strictest of sense. So is it as an economy on the right side for 2015?
Mark Tinker: The whole India story is about reform. It is about Modi and his ability to do the reforms, and the markets have backed that just in the way they backed Abe in the first year with his Abenomics. The markets got very excited and then exercised a little bit of caution, as we saw in Japan. I suspect the same might happen with the Indian market in 2015, but the really good thing is that he took the opportunity to take away those subsidies on energy. Secondly, by having a tax wedge in between the amount you pay for your gasoline and the amount that the crude oil costs, as we have in Europe for example, means that the consumer is less sensitive to changes in the dollar or in oil. So it is positive for India and we like the fact that the government has taken the opportunity to remove what has been a long-term structural problem for the government finances.
ET Now: Do you believe that what is happening to India or some of the other emerging markets is year-end position booking and maybe that will stop once December is over? Is that the correct analysis?
Mark Tinker: It is certainly. What we are seeing across the Indian markets is year-end positioning. So we have to be careful not to read too much long-term trends into that. Back to winning ways? Well, one has to be a little bit careful and I think it is back to fundamentals. We have had a lot of momentum and India obviously in the first half of the year had a tremendous performance. It is still one of the best performing markets out there, but most of the performance is down in the first six months.
The last three to six months have been reasonably flat and it is really China that has taken off. So it is almost like the baton has been passed on from India to China. But I have to say when we look at that famous acronym of BRICS, the 'B’ and the 'R' -- Brazil and Russia -- as effectively raw material energy producers are going to struggle whereas the 'I' and the 'C' -- the consumers India and China -- are in a much better position as a result of what we have seen develop over the last six months in commodities. But it is not all plain selling and the big worry I would say is we must watch the dollar. If you are not going to get a hold of dollar debt, you are going to have a pretty tough 2015 unless you can restructure that.
ET Now: India is a consumer of oil in the strictest of sense. So is it as an economy on the right side for 2015?
Mark Tinker: The whole India story is about reform. It is about Modi and his ability to do the reforms, and the markets have backed that just in the way they backed Abe in the first year with his Abenomics. The markets got very excited and then exercised a little bit of caution, as we saw in Japan. I suspect the same might happen with the Indian market in 2015, but the really good thing is that he took the opportunity to take away those subsidies on energy. Secondly, by having a tax wedge in between the amount you pay for your gasoline and the amount that the crude oil costs, as we have in Europe for example, means that the consumer is less sensitive to changes in the dollar or in oil. So it is positive for India and we like the fact that the government has taken the opportunity to remove what has been a long-term structural problem for the government finances.
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