Mark Mobius, Executive Chairman, Templeton Emerging Markets Group
Jun 03, 2016 | Source: Business Standard
If Russia sanctions are lifted and Brexit does happen, it could be positive for Russia. Because then a lot of the East European countries who are members of the EU will feel it is possible for them to become more independent of the policies of EU. So it would be quite good for Russia.
We are increasing weight of India. We have about $2 billion plus investments in India and we want to increase it. Given the fact that the country is growing and with the on-going reforms, banking is the obvious selection to begin with. And some of the conglomerates, companies that are involved in a number of sectors and getting a wider exposure of the markets will be another area. We also like technology and pharmaceuticals.
The good news is that these bad loans are now being revealed. The government has said that lets come clean, let’s be honest and reveal what we have and then we go about correcting it. That is a pretty healthy environment for the banks. That's the reason why we think it is good sector. We have a mix of both public and private bank stocks in our India portfolio.
The US rate hike has been discounted by the markets maybe 2,000 times already. Basically these central banks including the Fed are running out of ammunition. They have been given an impossible task of creating economic growth. This is not their function and this is not something that they are able to do. Interest rates are not going to affect that one way or the other. It is the government policies and reforms that would really create this change. And the Modi government here in India realises that. I think they have articulated that very nicely.
First of all it will probably come as a big surprise if the British vote to exit and it will come as a big shock in many directions. It will have a big impact on Europe obviously and the impact on Europe will reverberate around the world. All kinds of ramifications - in trade, in politics, in currencies, in markets, etc. London as a financial centre will probably be threatened and they will have to find a new center somewhere in the world. This will have a big impact. I think they are playing with fire.
The continuous movement at every level of the government has become quite evident and when you put that all together, you realise that the impact is going to be significant. The emphasis of Modi government on the low income segment of the population is very good. I believe it not just a populist move but is also a key element in making the Indian economy healthy because you are creating a whole new generation of consumers and people who are becoming more productive. The Modi government's emphasis on empowerment rather than hand-outs is very good. The identity card movement is also very positive.
We would like them to go ahead with GST but we realise that their hands are tied with the Congress not supporting it. At the end of the day the fact that they are moving in that direction and are close to implementing it is going to be very good. That will have a positive effect on corporate earnings.
In the global banking world Rajan has probably been the best. He has been the voice of reason and logic. We hope we can keep him on. If he is replaced with a politically-oriented person then the reaction will not be very good. But if it is somebody with a good reputation and who has a history of independence, then it should not be a problem.
8% growth is quite possible. I can see India growing at 10% in the next few years if reforms continue to kick in. I don't buy the argument that GDP numbers are fixed. The people who do these numbers are trained economists and have been trained by the World Bank. A lot of people look at these numbers. I believe the numbers are reasonably accurate, give or take half a per cent.