Equity focus: India a lucky economy, remain cautious on UK stocks

Ben Gutteridge, Head of Fund Research for Brewin Dolphin, joined Tip TV to present his view on UK stocks, India as an emerging economy and a brief note on Japan.

Neutral on UK equities

Gutteridge noted the current exposure to emerging markets and the commodity complex for large UK firms, leading to his view of neutral on UK equities. He expressed concerns about deflation and demand, with both commodity prices and bond yields moving lower. Gutteridge further commented on the reaction of stocks to their own earnings performance, highlighting how the FTSE 250 looks reasonable to be exposed. He outlines to be cautious in the short-term, with concern over demand, but to be constructive over the medium-term over developed market equities, with better US and UK jobs data leading to higher levels of consumption.

India a place of change

Gutteridge continued by expressing his view on India, which he deemed a lucky economy. He added that India faces less funding requirements as energy costs have fallen, and how the reformist government has made investment more palatable and has begun tax reforms. However, he noted the problem of transporting goods across India remains a problem, with tolls at sector borders. Gutteridge believes a swap of borderline taxes for VAT would free-up the Indian economy and benefit Indian firm’s production and costs.

Japan equities tied to USD/JPY

Gutteridge finished by presenting the relationship between the USD/JPY and Japanese equities, focusing on how the weaker Yen has brought firms into completion with the rest of the world as their goods and services have become more competitive.