Mumbai: Brokerage and investment group CLSA Asia-Pacific Markets is bullish on Asia and gives more weight to India than China, said global equity strategist Christopher Wood. He also said in an interview that Asia and India are in a secular bull market. Edited excerpts:
Is the recent rally a bear or bull market rally?
I’m viewing this as a counter-trend rally in a secular bear market for the US. I believe Asia and India remain in a secular bull market. So I have a fundamentally different view for the Western world and Asia.
Incremental decoupling: CLSA’s Christopher Wood says next time markets in the West slump, Asian markets will prove more resilient. Ramesh Pathania / Mint
How would you describe what happened in 2008 in India and other Asian markets?
I would describe that as a deep cyclical correction in Asia and emerging markets driven by massive collective damage from what was going on in the Western financial system. In my view, the sell-off in Asia last year was exacerbated by dramatic liquidation by foreign money, particularly by hedge funds and so-called funds of funds.
Has a secular bull market started again in India?
Yeah, I think it’s recommenced. I think it’s two technical pieces of evidence that support that view. The first is that Asian and emerging markets have been leading this rally ever since they bottomed last October-November. The second point is that when the S&P (S&P 500 index of US stocks) made a new low in March, the Asian markets did not make a new low. That is technical evidence to me that Asian markets and emerging markets have become the asset class of choice in global equities. In the very short term, because Asia and EMs (emerging markets) have outperformed dramatically, there is some short-term scope for the S&P to outperform. But in the long run, the asset class of choice to remain fundamentally overweight is Asia and emerging markets.
Often, the measure of a restart of a bull market is when the previous highs get taken out. How long is it before you think India and other Asian markets can take out their old bull market highs?
I don’t assume that happens quickly because I’m bearish on the Western world. If I wasn’t bearish on the Western world, then I’d say very quickly, but I am. So in my view we’re in a process here, we’ve commenced a process of incremental decoupling from Western markets. My view is that next time the Western stock markets go down, the Asian markets will prove much more resilient. But this process is incremental; it’s not going to happen on a 12-month view.
How bearish are you on the US markets?
I would expect a retest of 660 level (of the S&P 500 index) in due course in the US if the equities correct and it coincides with the new dollar rally, because the dollar rally is on de-leveraging. But if the dollar keeps declining, then the lows on the S&P need not be so large because some of the downside will be taken on the dollar.
Even if the S&P were to go for a retest, do you think none of the emerging markets, including India, will go for a test of their 2008 lows?
I don’t believe in a world where the S&P revisits the lows of March. I don’t think the Asian equity markets (and) India will revisit the lows because I think the Indian economy has demonstrated its domestic-driven resilience this year. We are now getting people talking of 5.5-6% growth.
Are you overweight on India and China?
I’m overweight both on India and China but in the last quarter, more on India.
The interview will be telecast on CNBC-TV18 this weekend.