India Best Asian Market To Invest, Says Julius Baer's Mark Matthews
Matthews says Asia will do well this year as the region's economies are generally not highly indebted.
India is the best market to invest in Asia if one compounds the returns over the long term, according to Mark Matthews, the head of research for Asia at Julius Baer Group Ltd.
Matthews pointed out that the number of investors who only seek some exposure to Asia are much larger than the ones who examine each and every individual country very closely and then decide which ones to invest in.
And India will be a beneficiary of this, Matthews told BQ Prime's Niraj Shah in an interview.
"India has clocked a compounded average return of about 9% per year in dollars and no other market in Asia comes close to that," he said, citing 30 years of data. "The closest would be (South) Korea at about 7%."
Matthews said there is some credence to the idea that India will underperform China this year. "But when you compound the returns over the long term, it (India) is the best market to invest in Asia."
He said Asia could do well this year because Asian economies are generally not highly indebted and the markets in this part of the world are not expensive.
However, he marked India as an "anomaly" in this regard, but highlighted other markets like southeast Asia, Hong Kong, Taiwan, South Korea and Japan as inexpensive.
Matthews said the backdrop is positive for Asia in general and it will attract flows into the markets, including in India.
Equity-Centric Investment Culture
Citing the example of the US markets, Matthews said Indian households are becoming more confident to own equities.
He said this was positive in so many dimensions due to the "simple" weight of money that will come to the market as the middle class and above constitute a large population. Secondly, as more households invest in equities, the more the market will become transparent and companies will run better.
Fixed Income Vs Equities
This year, the advantage is more on the fixed-income side if one waives the risk return. But with an investment in equities, the investor becomes a shareholder of the company and gets the benefit of increasing capital gains, according to Matthews.
He said fixed income could do well this year. "I think it will, but I also don't see why equities can't do well also," Matthews said. "They both have their attributes."
Rates To Stabilise
Matthews said the market is having a hard time understanding what exactly is going on and it is vacillating between panicking about inflation and recession.
The market expert assured that interest rates are ultimately going to stabilise. "We will be able to handle a Fed funds rate of around 5%, 5.25%."
The inflation will also come down and, eventually, rates can come back down a little bit too, he said.