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By Oren Laurent
President, Banc De Binary
Evaluating the emerging markets in the aftermath of the recession has proved to be a dilemma for global hedge funds and investors. For every analyst who has heralded the potential of these new markets, another has highlighted the geopolitical instability. This week, India takes the spotlight after Obama’s three day visit. Will the positive outcome of talks mark a new era and inspire previously cautious investors?
Obama’s visit was certainly not arbitrary. The timing of the trip, to coincide with Republic Day, India’s annual celebration of the adoption of its constitution in 1950, was symbolic and vitally significant. India traditionally reserves invites for guests from countries with which it enjoys friendly and strategic relations; this year’s parade marks the first time a U.S. President was awarded with such an honor. As if to reinforce the point, Indian Prime Minister Modi greeted his visitor at the airport with an amicable hug. Before talks even began, the message to the world was clear: the personal friendship between Modi and Obama reflects the strengthening ties between Delhi and Washington.
And the talks went smoothly too. The leaders announced together on Sunday that they had agreed a “breakthrough” deal to allow U.S. businesses to invest in the development of civilian nuclear energy in India. Although the outline for this was agreed back in 2008, there were concerns about the liability American firms would face in case of an accident. The establishment now of a large insurance pool will enable co-operation and progress. The two countries also agreed to scale up bilateral trade and work together on a number of defense projects.
Obama’s timely visit comes in the wake of notable progress in India’s economy. Modi has emphasized fiscal policies since coming to office and has strived to increase overseas trade. He has also set out to reduce political corruption and bureaucracy which have previously deterred potential investors. The result? The World Bank and International Monetary Fund have both estimated that India will outpace China as the world’s quickest growing economy within just two years.
So while the emerging economies may have yielded disappointing results for the past three in four years, that doesn’t mean you should give up hope. On the contrary, investors could do well to take advantage of the current low stock and index evaluations. If the global economy rebounds, it looks likely that countries like India will lead the way in terms of economic growth. It may just take a little investor confidence to get the ball rolling. Let’s see how strong the Obama effect is.
