The world is unlikely to foresee a double dip recession in the near future. This is because the yield curve (US) is still comfortably in the positive territory, according to Stephen Corry, Director and Investment Strategist, Merrill Lynch Global Wealth Management, Asia Pacific Region.
He was speaking at a press meet on Monday to highlight the mid-year outlook and investment strategy for the second half of 2010. A negative yield curve, difference between long term and short term sovereign bonds, indicates a looming recession, he said.
Corry expects the FII outlook for India to remain positive in the second half of the year with another $5 billion to 7 billion expected to flow into Indian equities.
Indian GDP is expected to grow 8.1%, provided crude prices don?t rise beyond $120 per barrel and there?s no double dip, according to Indranil Sengupta , economist of DSP Merrill Lynch.
He expects RBI to hike lending rates by another 75 bps and credit growth to remain broadbased. IIP is expected to slip to about 7% growth in the fourth quarter in FY11. Houseview is that the Indian equity market will remain range bound from here one with the 18,000 year end target already reached.
Corry expects the MSCI World Index to rise to 350 (it was at 289.75 as of July 30) and the S&P 500 Index to rise to 1300 (1101.6) by the second half of 2010. He believes that in the next ten years, investors from the developed markets should take a stock-specific approach rather than bet on wide index movements to maximize their returns.
Corry added as much as $2 trillion is currently sitting on US balance sheets, which indicated the companies were in good shape. However, he added that much depended on how these firms decided to use up this cash. He foresees a possibility of increased mergers and acquisitions over the next three years. Corry expects global crude prices to remain stable this year and touch $78 per barrel by the end of this fiscal, while gold prices to advance to $1500 per ounce by Dec ?2012.
Corry believes that wage hikes in China was a positive development for the country as that money was flowing back to the hinterland. In some ways, China?s economic growth could be at a turning point, with the focus shifting from exports to domestic consumption.