We expect volatility in the high growth equity markets, said Ken Peng, Asia Pacific Investment Strategist at Citi Private Bank, on Tuesday. Peng also said that the restarting of activities may further contribute to inflation.
“We are looking at the recovery and reopening but there are still some risk spots such as Brazil and perhaps India, but these are not something that is going to reverse the trend in terms of the pandemic. Vaccines, as we get into a much broader distribution, we will succeed to the pandemic impact in our lives,” he told CNBC-TV18.
Peng further said, “Therefore, we will be able to travel again in the second half of this year and this means that a lot of depressed activities such as travel and leisure, transportation, retail, hotels will be able to come back and that’s going to make another round of contribution to inflation and looking at the US for example, Consumer Price Index (CPI) could reach 3 percent this year.”
On the US, Peng said, “Liquidity situation in the US bond market is very healthy, so we are not in a situation of market disruption in this location, but if you ask me if the trend of rising yields and rising inflation has – has that ended. Not at all. So, in terms of the impact of rising interest rates on equity market volatility, we are still likely to see more.”
On India, Peng said, “India is not a very export-driven market and what has happened is very domestically driven; you have bond yields that are completely inconsistent with 5 percent inflation and what that ends up happening is a lot of bond investors, yield seekers would go into equities and with that kind of a backdrop Indian equity market should be supportive - whether that is going to perform the wider emerging markets – I think it still depends a bit on the dollar situation.”
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