May move into a more positive period for global markets: HSBC#39;s Bill Maldonado
Bill Maldonado, CIO- Asia Pacific at HSBC Global Asset Management, is of the view that if we can turn some of the last year’s big headwinds, namely the Fed’s stance on interest rate hikes and the trade negotiations, to even neutral without a tailwind, 2019 may well be a good year for markets.
“We may be moving into a slightly more positive period for global markets, for equities perhaps especially for emerging markets (EMs) and Asia. A couple of things that have been big headwinds in 2018 namely the Fed’s stance on interest rate hikes and the trade negotiations are turning a bit more neutral perhaps a little bit early to say they are turning into tailwinds but they are certainly turning a bit more neutral and I think that will allow the underlying positive characteristics of the market come out and what I mean by that is that valuations are very cheap and profitability during this entire very volatile period has been improving at kind of a very significant double digit rate of growth, which has left us with a very attractive market. So if we can turn some of these headwinds even to neutral without a tailwind, we can maybe have a very positive period in the markets,” Maldonado told CNBC-TV18 on January 11.
Talking about the growth prospects for this year, Maldonado said, “We have to get a measure of the degree of slowdown so don’t forget in 2017 and going into 2018, we had very strong global synchronised growth way above trends rates of growth coupled with very low inflation. So we had a real Goldie locks period. It was a very strong period of time for market and we saw the consequences of that in 2017 with very strong asset performances.”
“During 2018 and now into 2019, we have seen somewhat of a slowing down and less synchronisation globally but putting that into perspective, with still growing at or around trend rates of growth, still we are very low levels of inflation and relatively low levels of interest rates. So I don’t think we can get too pessimistic about that. That is still a very good environment and the underlying fundamentals of the markets are very strong, profitability has been increasing at double digits depending on region and market but very strong rates and as the markets have sold off, valuations have got cheaper. So I don’t want to get too despondent about a slowdown to trend rates of growth, I don’t think that is a negative thing necessarily,” said Maldonado.
With regards to India growth, Maldonado said, “India is a bit more of a mixed bag. The Indian market is not cheap but historically it doesn’t often get cheap. One explanation for that is that rates of growth of profitability in India tend to be higher than other markets in the region. So it does command a premium and we are trading at or around slightly above the typical level of valuation premium. So I think for international investors, the message is that one needs to be much more selective in India, we have got differences in valuations between cyclicals and defensives and other things like that.”