Financial services firm UBS feels that India is, still, one of the most attractive places in Asia at present, reports the Economic Times of India. In fact, UBS has upgraded India from moderate underweight to overweight as it feels that valuations have improved substantially and that the Indian economy is less affected by the global financial crisis than most other markets. The foreign financial major, however, does expect further weakness in the coming quarters. Among Asia’s leading economies, China remains UBS’ largest overweight, followed by India, Hong Kong, and Singapore. It advises caution on Korea, Malaysia and the Philippines.
As per the report: Earnings growth has been declining sharply and is expected to decline further in the coming quarters. However, Indian earnings in 2009 are less at risk than those of the other Asian markets. Incidentally, growth is expected to contract in Singapore, Hong Kong, South Korea, Taiwan, and Malaysia. The relative strength of the economy, together with the improved valuation, makes India as one of the more attractive places in Asia, in the current environment.
UBS is also more positive on the Indian economy than on those of most other Asian countries because India, with an export-to-GDP ratio of 13%, remains an overwhelmingly domestic-oriented economy. The larger economies, China and India, should fare better in a global downturn as they are more domestic-oriented and, in the case of China, have substantial room for fiscal stimulus, it explains. Nonetheless, it expects growth to decelerate further in China and India in 2009.
UBS adds that with declining inflation, the RBI has substantial room for further interest rate cuts in the coming months. “Relative valuations, which were unattractive in the past have, improve considerably and India does no longer stick out as an expensive market,” it says. That said, in comparison to China, the large fiscal deficit limits the room for the government to support the economy with fiscal stimulus, it explains.
