David Fuller and Eoin Treacy's Comment of the Day
Category - India

    India Spending Bonanza Powers Stocks as Valuations Take Backseat

    This article by Subhadip Sircar and Kartik Goyal for Bloomberg may be of interest to subscribers. Here is a section:

    Stock-market sentiment has also been buoyed by the absence of new taxes on the wealthy and corporations in the budget. Traders expect the government’s growth push to boost corporate profits, which are already showing signs of a recovery. As the results season continues, 21 of the 29 NSE Nifty 50 firms that have reported earnings so far have beaten analyst estimates.

    If the budget measures are executed properly, they have the potential to increase the share of corporate profits in GDP, and help bring about a new private investment cycle, recovery in domestic equity flows and earnings growth, analysts at Morgan Stanley wrote in a note.

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    Email of the day - on the early stages of a secular bull market.

    Until the beginning of last year you often spoke on the theme of the early stages of a secular bull market. David had begun speaking about it as long as 4 years ago. But with the onset of the pandemic, you have been largely silent about it. Has it stalled or, in your view, already peaked?

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    Tata Motors ties up with private lenders for commercial vehicles financing

    This article from Bloomberg may be of interest to subscribers. Here is a section:

     

    Homegrown auto major Tata Motors on Monday said it has entered into partnerships with leading private banks, including HDFC Bank, ICICI Bank and Yes Bank, to fund its commercial
    vehicles.

    The tie-ups aim to enhance value offerings for customers of both new as well as pre-owned vehicles throughout the customer lifecycle, Tata Motors said in a statement. The offerings arising out of these tie-ups will include ancillary financial provisions such as fuel financing, working capital financing, aggregate financing and service cost financing. It will enable customers to avail attractive
    financial schemes from all the partner financiers with minimal formalities, it added.
     

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    Email of the day - on India and downloading the video

    Wish you, Mrs. Tracy and your lovely children a very Happy Christmas and a great holiday season.

    I have always loved your optimism on India ever since we first met in Singapore nearly a decade back. Regretfully I was unable to share the same sentiment then and unable to do so now.

    For instance, internet connectivity is poor even in Mumbai. At home I am at a handicap, while at office in the prime Nariman Point area we have three redundancies, and still lose out, though rarely.

    The only way to enjoy your lovely "Eoin's World View of Markets" as I like to think of your daily videos, is to download them and then listen offline. In the absence of a download icon over the past two days, the streaming media loading every now and then has been highly irritating.

    I sincerely hope you will be able to restore the download facility so that we in the internet challenged parts of the world can enjoy your uninterrupted services.

    Wishing you and your family fun times in the meanwhile.

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    Extracting Growth Alpha in Emerging Markets

    This report from Jennison Associates may be of interest to subscribers. Here is a section:

    Generally speaking, an investor’s primary motivation for making a portfolio allocation to emerging market equities is the desire to tap into superior structural growth. However, equity market returns rarely correlate tightly to economic growth. There are many attractive secular growth companies in emerging markets—and they exist regardless of the economic growth conditions of their domestic economies. Investors wanting to tap into the powerful long-term benefits of superior structural growth trends can benefit from seeking out highly active strategies. In our experience, a strategy succeeds by continuously seeking out innovative companies with superior growth trajectories. A clear and consistent investment philosophy and repeatable investment process can help to ensure that a portfolio reflects bottom-up decisions that incorporate the superior growth available in EM equities.

    The growth opportunity set is bigger than is generally thought. EM companies face challenges and problems different from those of their developed market counterparts, but their distinct circumstances often spur them to innovate and disrupt existing practices. EM companies are moving up the value chain, from export-oriented business models built on low-cost labor and cheap manufacturing to higher-value-added businesses based on technological and scientific innovation. Low recognition of these dynamics by investors and indexes creates an opportunity for growth-minded investors. Add to the mix companies that execute well to exploit a superior economic growth backdrop, and the opportunity set expands.

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    Vaccine To Extend Rebound in FY22

    This summary report focusing on India from Goldman Sachs may be of interest to subscribers. Here is a section:

    Will globalization survive COVID-19?

    This report from UBS may be of interest to subscribers. Here is a section:

    Email of the day - on the politicisation of monetary policy

    I hope life for you in California is more fun than it is here in England. But let's hope we really are past the low point as far as the virus is concerned. I had thought that would be true for economies too, but this latest move by President Trump (summarised in the article by Ambrose Evans Pritchard) does raise questions. With this move, which asset classes do you think will benefit and which will lose on a 3-6 month timescale?

    Best wishes to you and family. 

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    The Next Phase of the V

    Thanks to a subscriber for this report from Morgan Stanley. Here is a section:

    #1: A global synchronous recovery: We expect a broad-based recovery, both geographically and sectorally, to take hold from March/April onwards. Driving this synchronous recovery will be a more expansive reopening of economies worldwide and the extraordinary monetary and fiscal support now in place. Global GDP, already at pre-COVID-19 levels (based on seasonally adjusted GDP levels), continues to accelerate and is on track to resume its pre-COVID-19 trajectory by 2Q21. We expect China to return to its pre-COVID-19 path this quarter, and the US to reach it by 4Q21.

    #2: EMs boarding the reflation train: After a prolonged period in which EMs have faced a series of cyclical challenges, macro stability is now in check. With the COVID-19 situation improving in a broad range of EMs, their pace of recovery is catching up. EM growth rebounds sharply in 2021, helped by a widening US current account deficit, low US real rates, a weaker dollar, China’s reflationary impulse, and EMs ex China's own accommodative domestic macro policies.

    #3: Inflation regime change in the US: We see a very different inflation dynamic taking hold, especially in the US. The COVID-19 shock has accelerated the pace of restructuring, creating a significant divergence between the output and unemployment paths. With policymakers maintaining highly reflationary policies to get back to preCOVID-19 rates of unemployment quickly, wage pressures and inflation will pick up from 2H21. We expect underlying core PCE inflation to rise to 2%Y in 2H21 and to overshoot from 1H22, with the risk that it happens sooner.

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