Wednesday, September 30, 2015

India stands to outperform within EM - BBH

FXStreet (Córdoba) - According to Win Thin, Global Head of Emerging Market Currency Strategy at Brown Brothers Harriman, India has a solid growth outlook, inflation is falling and external accounts in good shape creating an environment for the county to outperform within Emerging Markets (EM).

Key Quotes:

“The RBI surprised the markets with a 50 bp cut in policy rates, yet the rupee firmed. India stands to outperform within EM in the current environment. The growth outlook is solid, inflation is falling, and the external accounts are in good shape. Structural reforms have stalled, but markets have adjusted their expectations somewhat.”

“Exports account for only 15% of GDP, making India fairly resistant to the global growth slowdown.”

“The fiscal numbers are India’s weak spot, but even here, improvement has been seen. (…) The consolidated public sector deficit is seen by the IMF at around -7.2% of GDP this year and -7.1% next year. Strong growth will help these numbers, but structural reforms are clearly needed.

“India’s external debt metrics are solid, and compare well to other major EM countries.”

“The rupee is one of the best performers in EM, -4% YTD against the dollar. This is second only to CNY at -2.5% YTD (…) We expect INR to weaken with the rest of EM, but its outperformance to continue. USD/INR is likely to test the all-time high near 68.85 from August 2013.”

“With inflation likely to remain low and the RBI in the midst of an easing cycle, we think Indian bonds are likely to continue outperforming.”
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