The Hindu Business Line : Market View

The sharp rise in the equity market does warrant a closer look at various risks that could manifest over the short to medium term. First and foremost is the global liquidity situation, which was one of the prime reasons for the rise in equity markets around the world. One needs to closely monitor the possible impact of interest rates in the developed economies, on the flows into emerging markets. Other risks include energy prices, infrastructure bottlenecks, availability of skilled professionals, growing current account deficit and reforms becoming a prisoner of political wrangling. Apart from the global risks in terms of input costs and possible demand slowdown due to lower economic growth in developed economies, Indian companies would be vulnerable to any fall in domestic demand on account of the central bank's efforts to reign in inflation and avoid overheating. Given the expected robust GDP growth and the expected further improvement of corporate India's earnings quality, while sentiment could be impacted over the short term due to these risks, we believe sound fundamentals will prevail over the long term.

Franklin Templeton Investments

China has provided an increasingly important source of demand growth in Asia owing to its rapid economic expansion and openness to trade. The US has accounted for about 20 per cent of overall global growth since 2002, measured at purchasing power parity (PPP) exchange rates, while China has contributed 30 per cent of global growth. But while PPP adjustments make sense when gauging changes in global living standards, GDP calculated at current exchange rates sheds more light when it comes to judging global growth spillovers. (Particularly since the Chinese renminbi has been pegged to the dollar.) In spite of its rapid growth, in nominal US dollar terms, China's economy is not much larger than the UK's. Since trade accounts for such a large share of China's economy, the gap with the US in terms of imports is much narrower than the GDP gap. In October, US imports were worth about $182 billion while China's came in at about $64 billion. But a large share of that import bill represents intermediate goods shipped in from China's neighbours to be re-exported in the form of finished goods to the US, meaning that independent of the Chinese authorities' efforts to slow investment spending, slower US growth should have an impact on Chinese import demand.

Global Macro Themes, Pimco bonds

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