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Brent sub $93/bbl: Real benefit for India, Taiwan, says UBS

The European benchmark Brent, recent hit a 27 month low and is now hovering near USD 92.73 per barrel. This fall in global oil prices is due to over supply concerns.


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Emerging markets like India, Turkey, Korea and Taiwan are likely to see the real benefit of declining commodity prices, especially Brent crude, says Geoffrey Dennis, Head of Global Emerging Markets Strategy at UBS Investment Bank.

The European benchmark Brent, recent hit a 27-month low and is now hovering near USD 92.73 per barrel.  This fall in global oil prices is due to over supply concerns.  

Speaking to CNBC-TV18 about the performance of the Narendra Modi government and his outlook on India, he says that reforms are likely to take place, but for now one needs to be patient.

Below is the verbatim transcript of Geoffrey Dennis’s interview with CNBC-TV18’s Latha Venkatesh and Reema Tendulkar

Latha: What is your sense of how the emerging markets or attitude to emerging markets might shape up? We are seeing two-three days of positive performance by the Asian markets even in the face of Wall Street not doing too well. Is there some attraction returning or would you worry that liquidity is drying?

A: There is some attraction returning, we had a pretty healthy selloff in September, we lost almost 10 percent of the index in dollar adjusted terms for a number of reasons. And we see some of these concerns for the market were probably overdone and we think the markets are forming a little bit of base here. While we are going to continue to be quite volatile in terms of performance going forward, we certainly think that for the time being the correction is over and we expect to see some decent gains over the weeks ahead.

Reema: Do you think India’s outperformance has come to an end and secondly with respect to India’s correction coming to an end? How much higher could the markets go say in three-six months or year end at least?

A: We are not particularly bullish about how much further India could go up in the short-term because it is just so expensive. There is a great interest in seeing the delivery of some of the structural reforms that the market wants to see and of course it’s pricing ahead of the elections earlier in the year. But in no sense do we think India is a poor story. I think it has just run-up a long way in anticipation of those reforms and it is now a question of delivering those reforms.

We actually think that India is one of the best in markets in emerging in terms of the performance of the corporate sector, in terms of greater return on equity and earnings growth. We think it is going to be very good market in the long-term, but we just wonder whether it has gone up enough for the time being. It is quite an expensive market now trading between 16-16.5 times forward earnings so it is quite expensive.


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