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See lots of buys, but waiting for right price: JPMorgan AMC

Emerging market performance in FY15 has been strong so far despite some negative newsflow. That’s the word from Noriko Kuroki, client portfolio manager, emerging markets equity team, JPMorgan Asset Management. She says the outperformance has been on back of two things: relatively cheap valuations and stable currencies.

“We have seen currency stabilising and more supportive growth backdrop in the global economies starting to filter through to emerging market exports and that this should broaden into the domestic economies going forward and the market is always forward looking,” she told CNBC-TV18’s Sonia Shenoy and Latha Venkatesh.

On India, she says JPMorgan has a positive long-term outlook, but prefers to maintain a cautious stance from a valuation perspective.

“We think that Indian companies are very interesting opportunities. There are lots of very high quality management teams out there. So, from the bottom-up stocks selection point of view, there is no shortage with the kind of companies that we want to invest in. It is a question of at what price,” she told the channel.

Below is the transcript of Noriko Kuroki’s interview with CNBC-TV18’s Sonia Shenoy and Latha Venkatesh.

Sonia: If you could just give us your assessment of how emerging markets will pan out in the second half of the year considering that there has been a stark outperformance of emerging markets versus developed markets in the first half?

A: It is encouraging to see emerging markets outperforming despite some negative news flows this year. We think that there are couple of reasons behind this. One is, valuation. Emerging markets underperformed developed markets for the last couple of years and consequently valuation of emerging markets became attractive not just against its own history but also against developed markets. So, sometimes in the absence of any structural problems cheap valuations on its own can act as a catalyst.

The other positive is that we have seen currency stabilising and more supportive growth backdrop in the global economies starting to filter through to emerging market exports and that this should broaden into the domestic economies going forward and the market is always forward looking. So, the market is starting to reflect this positive backdrop I think.

Latha: The Indian headline indices itself has given a 35 percent jump year to date. Do you think at this point in time you will want to step in or do you think this market will give you cheaper levels at all?

A: For India we like the long term story. India’s growth rate halved at the trough but it is clearly recovering. Also the reforms story in the mid term is very positive.

Having said that in the short-term we need to be cautious on the valuations; it looks fully valued when it comes to more tactical positioning. So, we look to add perhaps more when we see some adjustment in the valuations.

So, we like the story in the long term but technically we are a bit more cautious from the valuation point of view.

Sonia: What have you made of the move that we have seen in the Yen? Huge slip over there, do you expect to see more pressure on the Yen because it does benefit a lot of companies that have direct and indirect imports from Japan?

A: I think there is I wouldn’t say speculation but an expectation that Bank of Japan (BoJ) will be easing at some stage. Given that Fed is gradually moving towards the exit from the QE and market looking into the possible timing of the rate hike it is natural to expect some pressure on Yen.

Latha: You point out that Indian valuations are at this point in time perhaps either fully valued or even rich. However there are beleaguered valuations in the infrastructure space, in the metals space, in the industrial space, is there any space at all that you will be interested in even at current levels?

A: We will be more stock selective rather than just buying on the theme. So, infrastructure or materials these sectors in the long run the earnings stream will be dependent on execution of the various reform initiatives. So, we need to look out for the milestones for the implementation of the reform initiatives.

We think that Indian companies are very interesting opportunities. There are lots of very high quality management teams out there. So, from the bottom-up stocks selection point of view, there is no shortage with the kind of companies that we want to invest in. It is a question of at what price.

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