At a panel discussion on ‘Capital On The Move: Winners and Losers in a Fragmenting World’, Arora, CEO and CIO, Asia Pacific, at Allianz Investment Management, said investment decisions will be harder as tariffs will have a large impact on global growth. “One has to be careful and budget in, as one makes allocation decisions, not just diversification, which is probably as old as investing itself, but also be sensitive to the risk linked with countries, currencies.” The panel was moderated by ET’s Arijit Barman.
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Further, investors should “have flexibility in the portfolio to be able to manoeuvre it…(and) probably find a portfolio that also has exposures to some commodities, some safe haven assets like gold,” said Arora, adding that sectors like pharma, health, IT, and defence would benefit from tariffs or remain resilient.
Wood, global head of equity strategy at Jefferies, called tariffs “a zero-sum game”. Markets have so far shown surprising resilience to US President Donald Trump’s tariff agenda, but the longer such policies persist, “the more it will come clear that it’s a negative”, he said. “I think at the end of the day, the tariffs will end up being most negative for the US, because it’s a tax on American consumers.”
Read more: PM Modi’s self-reliance call is paying off amid global shifts, says Satyan Gajwani Steinbach, managing partner and global CIO at global real estate investment manager Hines, said the world is in “a new era”.”We don’t know what the exact contours are going to be of the new economy. But I think on the other side of it, businesses are resilient, creative and innovative, and everywhere, India included, (they) will figure out new ways of working,” he said.The new chapter is not about globalisation like the previous one, but about “the world coming back apart” in which there’s going to be more friction costs, especially more of moving goods, Steinbach said.
Combined with increased expenditures and elevated debt levels in the West, these forces are likely to push global interest rates higher in the long run, he said.
Wood noted that within the BRICS nations, China and Russia have been pursuing an agenda where there’s incremental trade being done outside the US dollar and the US has been using stablecoins, or cryptocurrency, to combat this drift.
Arora said that the recent phenomenon of supply chain dislocation in the world has just begun and will play out over the next few years.
She said India has to its advantage manufacturing, along with liberalisation of policy and a developing infrastructure. “So, we have the big parts of the jigsaw falling in place, but the urgency needs to be there,” she said. “Otherwise, we would have strong competition and it is not going to be just India’s gain, what is China’s loss. We will have others to share it with, be it Vietnam, Malaysia, (or) Indonesia.”
Both Arora and Wood called for some reforms in existing norms.
Arora said they are anticipating a bill allowing 100% FDI in the insurance sector as India has low penetration and liberalisation will help bring niche players and special use insurance to the market.
Wood said both on the fixed income and the equity perspective, India is a harder market for FIIs than most emerging markets due to complex regulations and permissions for investment. “So, a complete bonfire of those controls would open up India much more,” he said.
Steinbach said recent public REIT listings have added transparency and marked an important milestone in India’s market evolution.
Arora said the absence of a vibrant bond market calls for reforms. “In India particularly, the debt markets are not deep enough… And we’ll have to make structural reforms as well as induce investors to come to debt markets to make it vibrant.”
Wood said he prefers emerging market bonds. “I think G7 government bonds are in long-term bear markets… the monetary and fiscal policies in most emerging markets have been much more conservative and bond investor friendly, including in India, than in G7,” he said.
