Motilal Oswal
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August 10, 2018 11:55 AM | Market

Trade war is going to be strictly bilateral, says Ashmore Investment

Jan Dehn, head of research at Ashmore Investment Management spoke to CNBC-TV18 about the current trends in stocks market and outlook.

“I think there are clear limitations on how far the tariff war will go. First of all, because so much of production globally is now made across borders through very globalised supply chains. If you impose generalised tariffs meaning that whole countries isolate themselves from other countries then that has a massive economic impact and I don’t think there is any political appetite for that neither in the US nor in China. So that limits the trade wars to individual countries where one country picks on another country,” Dehn said.

“The US has already found that it is impossible to dissolve North American Free Trade Agreement (NAFTA) because Canada and Mexico are already so deeply integrated with one another. We have seen that Trump pull back from a trade war with Europe a few weeks ago and Japan is the last major ally of the US in Asia. So that leaves only China as one of America’s large trading partners that can become the object of America’s protectionist urges right now. So I think that the trade war is going to be strictly bilateral between the United States and China,” he added.

“I like Indian assets. India did very well for a while and then it had a period of underperformance particularly in the bond area when we saw greater signs of fiscal stimulus coming through from the government and we also had rising oil prices and we had inflation beginning to pick up partly because of the imposition of goods and services tax (GST) and other types of administered prices. Interesting thing about India right now is that the bond yields are rather high and I think inflation is ultimately going to start declining again over the next six months or so. I think Reserve Bank of India (RBI) is ahead of the curve, which is a good place to be and so bonds do offer some value now. I expect that we are going to see greater foreign interest in the bond market in India,” said Dehn.

“When it comes to equities, I am very encouraged that we are finally beginning to see a little bit of pick-up in consumer demand. We are also seeing that the non-performing loans (NPL) situation in the banking system appears to be stabilising and we are beginning to see some capex,” he further mentioned.
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