MANAGING RISK AND CREATING VALUE IN RAPID GROWTH MARKETS
R&C: In broad terms, how would you describe the current appetite of businesses and investors to tap into growing markets in recent years? What are the common characteristics that define growing markets in the current economic environment?
Bailey: Businesses and investors, especially the largest players, still have an appetite to operate in growing markets, but they are doing it in a more strategic and disciplined way. They are much more cautious compared to past years. The global economy growth continues to be modest and has struggled to get back on its feet from a rough ride at the beginning of 2016. In general, there are a number of factors worrying financial markets worldwide, including a surprise geopolitical event. In Europe, Britain’s possible exit from the EU and Spain’s general election are the focus, while many are watching the US presidential race closely and the impact of these possible political changes on the future world economy. The main emerging market powerhouses will likely continue to be China and India, although there are now more fears surrounding the Chinese economy and fears of deflation as a key risk for 2016. However, the economic environment in India presents some bright spots for potential growth. Fundamentals and conditions are improving: Indian labour is priced competitively after a decline in the rupee, private sector debt is low, India is a large beneficiary from lower oil prices, inflation has finally fallen below 10 percent with scope for further monetary easing and reforms are gradually reducing barriers to growth. The government is starting to address longstanding infrastructure problems, particularly in the power sector, and is raising limits on foreign portfolio and direct investment. These all speak to positives in the eyes of investors seeking yield and businesses searching for growth opportunities.
Jul-Sep 2016 Issue