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Brexit, US-China trade war resolution to help end 2019 on a good note: Radhika Rao, DBS

The next year is probably going to be more about convergence.

ET Now|
Dec 13, 2019, 04.15 PM IST
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ETMarkets.com
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It is going to be a good end to 2019 but in 2020, we will still have some risk here and there against the backdrop of slowing growth in the EM as well as China, says Radhika Rao, India Economist, DBS. Excerpts from an interview with ETNOW.

Lot of key developments taking place parallelly. First we have this historic landslide victory for the Conservatives in the UK and the endgame nearing for the US-China trade war as well. What does these key developments augur for global macros?
We are approaching Christmas with less pessimism. In December of last year, risk appetite actually took a beating. This time we have many of the hurdles that we have been facing through the year clear out in some way or the other. All is not done yet, but a healthy first step has been taken.

Like you said, in the UK elections, the conservatives have come back with a strong majority. That not only provides certainty over politics, but that will also help to give some definite direction towards Brexit. At the same time, the trade deal that we have been discussing for the past couple of months finally seems to be closer to its end than ever before. That will help 2019 to end on a good note

The risk assets which have been expensive in equity markets globally, are likely to get more expensive, factoring in these positives. The dollar had a very good run this year basically because of the policy divergence between the US dollar and the Euro . The next year is probably going to be more about convergence because monetary policy played a big part this year.

Next year, it is going to be a lot more focused on fiscal policies in the US and the Euro Zone as well. The incoming new governor has been emphasising on that and at the same time, globally, we do not expect many big ticket shocks. So, next year I think we are going to start off on a positive note. First up will be the Brexit in January. It will be interesting to see how the government pushes through Brexit with the strong mandate. Also, there are questions whether it is going to be hard or a soft Brexit. Also how they are going to leave out Ireland.

As the year progresses, you are going to see the momentum towards the US elections building up. In the midst of all of this, the trade war worries have dried down in the near term but there is a provision that if any of the agreements that US and China have agreed on -- that China will double its agri exports, provide some clarity on intellectual property and that US will roll back some taxes -- if there is any misgivings on these issues, the trade war could re-emerge.

So, it is going to be a good end to 2019 but in 2020, we will still have some risk here and there against the backdrop of slowing growth in the EM as well as China. That is the way we would look at the new year going into 2020.

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