No worry for EMs amid global growth, firmer dollar
Geoff Lewis, Global Analyst
Feb 17, 2017 | Source: CNBC TV 18
He signaled that central bank could hike rates gradually sooner rather than later as economic growth continues and inflation rises. After Yellen’s remark, dollar inched up by 0.3 % at 101.230.
On strengthening of the dollar: The general trend is if the dollar and yields rise, it turns out negative for the emerging markets. But, Geoff Lewis believes that global growth will be good for the emerging markets (EMs).
According to Lewis, possible short interest differentials have already peaked and the dollar is already 15 % over valued in purchasing power parity (ppp) terms. He said it is unlikely that the dollar will surge. Hence, the emerging markets will have a good year.
The earning season in India ended yesterday, some companies brought cheer to the market and few results were not up to the mark. Some earnings were disappointing but he maintains a decent macro outlook for India. He said that there is benefit of goods and services tax (GST) coming through and India has a good domestic growth story. India is going to remain a favourable destination for institutional investors.
“As long as we don’t have a sharply rising dollar or big increase in dollar prices, India’s growth will be well placed but it would be nice to see some of the earnings forecast coming through”.
The anticipation in the market is whether Fed will increase interest rates in March and what will be the pace for the rate hikes. Lewis said that Fed should stay cautious. “We do not see any strong reasons at the moment for changing this gradual path, he added.