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Sudhir Rajkumar, UN pension fund
Aug 17, 2018 | Source: ET Now
Repercussions of the US-China trade war: The most important structural change in the global economy that is currently taking place is the reversal of quantitative easing that had been going on for the last 10 years by the US Federal Reserve System. Over the last years or so, the US Federal Reserve has started raising rates and it has also started to take out some of the liquidity that had been pumped into markets and that coupled with the strong growth in the US economy is causing some concerns in terms of potential impact on the markets.
Impact of US trade war on global trade expansion: At this point in time, efforts are on to reduce some of the imbalances that have come about as a result of trade deficits among some of the major trading partners. From what I understand, at this point in time, the consensus still is that these are things that will be managed through negotiations. These need to be watched carefully but one should not get too alarmed about it at this point.
How will the rise in interest rates impact the current growth environment? The fact that a significant fiscal stimulus was provided by the current US administration makes it much more difficult to interpret real economy data coming out of the US. At the same time, it seems that there is significant strength in the US economy and certainly relative to other parts of the world. So far as the increases in interest rates by the US Fed are concerned, that do not seem to have had a major impact although some impact is being seeing in the interest rate sensitive sectors, house buying, cars and so on which is done on credit in the US. It will be important to see how this plays out over the next 12 to 18 months. It is also important to remember that the full effect of the tax cuts still has to be seen. There is a fair amount still in the pipeline and we need to see how that works out over the next 12 to 18 months.
Do you have any valuation concern in the equity markets globally right now? Although there may be some concern about equity valuations at this time, we expect that whatever bumps there may be in the road, will be okay in the very long term. When I say very long term, I am talking about 10 to 15 years.
What are your main concerns in allocating funds within the Indian region? We are always looking for good investment opportunities and we do invest globally. We have to look at our portfolio in terms of allocations to different parts of the world. Certainly. I would not say that we are pessimistic about India, we are long-term quite bullish on India . We just need to find the right investment opportunities. We are always looking for them and we invest both in public as well as in private sectors. So, we will continue to invest in private equity, real estate, as well as public equities in India as well.
Earnings reforms and economic progress in the country in the last three to five years: India has currently got the highest growth rate anywhere in the world among any major country or economy. The foundations are being laid for a strong future economic growth. There are certain short-term costs associated with laying those foundations but long-term, it looks certainly quite attractive.
long term
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