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Goldman Sachs' EM star braced for slower Chinese growth

Goldman Sachs' EM star braced for slower Chinese growth

China's slowing growth remains a cause of concern although the economy is unlikely to face a hard landing, Prashant Khemka, the chief investment officer of emerging markets equity at Goldman Sachs Asset Management (GSAM) said.

'We're concerned about the pace of growth going forward,' Khemka said at a press briefing on the outlook for emerging and developed markets.

He said that he wasn't as complacent as many others about believing that China would continue to grow at 7% plus.

He added that in recent years, an element of excess had crept into growth, partly fuelled by an acceleration in credit growth. 'That excess now has to be unwound and will be a drag on growth,' he added.

Neverthless, China remains one of the largest positions for the AM group in Asia, said Khemka.

He also said that while valuations were cheap (second only to Russia), investors had to keep in mind that earnings could be subdued next year.

Upbeat on India, not Thailand

Khemka was more positive on India's prospects. 'We are more constructive on India and certainly find many attractive investment opportunities.'

The new government, led by Narendra Modi, has boosted investor confidence, particularly because Modi has a track record in managing and executing infrastructure projects.

Khemka added that lifting economic growth from below 4% would not be very difficult, even if the government undertook moderate policy actions.

In terms of  Indian equities, he said valuations are reasonable and in line with historical averages. ‘We expect an acceleration in corporate earnings going forward, as the economy picks up from low single digits towards high single digits.’

The investment team is more cautious on Thailand given its political challenges and stretched household balance sheets because of high leveraging.

It’s pretty hard for me to forecast stronger momentum in terms of GDP growth,’ Kevin Ohn, head of Asian equity team, said at the briefing.

Overall, Khemka said that while there were large differences in the performances of various countries, the aggregate investment stance of GSAM on emerging markets was 'neutral with a positive bias'.

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