Global investors are committing a “mistake” by not considering India as an alternative supply-chain hub amid simmering U.S.-China trade tensions, according to JPMorgan's James Sullivan.
“Most of the investors think Vietnam or other Asean nations [as a new trade destination] due to the global trade realignment,” Sullivan, head of equity research (Asia, ex-Japan), at the global investment banking firm, told BloombergQuint on the sidelines of JPMorgan India Investor Summit. “The Association of South-East Asian Nations are beneficiaries but they are too small to take the incremental foreign flows that China is trying to push off.”
China's exports unexpectedly contracted 1 percent year-on-year in August. This comes as comes the U.S. slapped additional 10 percent tariff on $300-billion worth Chinese goods at the start of the month. Last week, U.S. President Donald Trump delayed the imposition of additional 5 percent tariffs on $250-billion imports by two weeks to Oct. 15.
India is at a favourable position to draw benefits on account of its non-alignment policy in such trade issues and a relatively greater size of its economy, Sullivan said, adding the country receiving record foreign investment in 2018-19 reflects “nascent” signs of such benefits playing out.
Other Highlights
Asia Equity Strategy
- JPMorgan is looking at economies with strong domestic demand driven by domestic consumption—India, Indonesia and Thailand fit strongly into the bill.
- Doesn't want to get exposed to export-oriented countries such as Taiwan and South Korea as global supply chains get disrupted.
U.S. Economy
- Odds of a U.S. recession has risen to 45 percent from 25 percent, according to JPMorgan's analysis.
- Expects at least three rate cuts from the U.S. Federal Reserve by year-end.
- These rate cuts to create significant flexibility for emerging market central banks to loosen monetary conditions.
Watch | what James Sullivan has to say about India and its prospects...
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