Geopolitical tensions not yet a red flag for investors: Cameron Brandt

Like I was discussing with Prashant Khemka from White Oak Capital as if there was uncertainty in the world and now you have this situation between India and Pakistan going on. And we have known historically that money always moves in a relative fashion and that is why I guess for the last one-month India was seeing inflows come in because there were a lot of things which were going right. Do you think now with the India-Pakistan situation that gets derailed at least in the near term?
Cameron Brandt: Diminished rather than derailed is what I would say. I have just been looking at the latest week’s numbers and while flows into dedicated India funds are not quite as strong as they have been, they are still positive.

What I have been picking up is that at least for the moment investors and fund managers are putting more weight on the benefits to India of much cheaper oil than they are on what is or was until the latest about regarded as you know spat.

But historically, things have to get pretty bad before investors really get chased out of a market and while there will certainly be more caution until this gets resolved, I do not think it is going to completely reverse the flows that sort of India funds and sort of Indian asset markets in general I have seen in recent weeks.

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But other fact is that especially on the trade talks, we have seen that at least getting started now because just yesterday a trade deal between US and UK has been announced. There is a possibility that maybe EU and India and even China the talks will be on. Give us some sense that at least in this term where are we headed, is the worst behind us with respect to the tariff tantrum and what could be the next with respect to the market and the reaction.
Cameron Brandt: Given the current US administration, never say never. But I actually think that a lot of investors who used President Trump’s first term as a template have certainly been expecting that after the sound and fury a somewhat more palatable midpoint would be reached.

We have certainly seen fixed income investors recover risk appetite over the past three weeks. Equity investors are still being somewhat cautious. It is not clear how much damage has been done and how much that damage will influence earnings for the remainder of the year, but certainly when I look at flows to fixed income funds, junk bond funds, mortgage backed funds, bank loan funds, and indeed emerging markets bond funds, all of those are starting to see money again after a pretty sharp hiatus in early.

You can see how charged up and emotional things are out here in India right now. And more importantly, when it comes to India and Pakistan, there is so many other country dynamics. You have got Turkey, you have got the Middle East, you have got China, and you have got the US dynamics as well. For the last one month that India has been seeing inflows, it has also been somewhat of a tactical play India versus China. Do you think that will completely get reversed now?
Cameron Brandt: I do not. You mentioned sort of the geopolitical complexities and the fact that there more actors than just India and Pakistan.

But the global financial markets have been living with a version of that now for three years. The situation in Ukraine also puts Turkey somewhat close to the action. Russia has gravitated to China for support. Europe and US are feeding arms to varying degrees into Ukraine. So, intensely as you and your viewers feel the current situation and it certainly, it is not that it could not get worse, but financial markets have been living with an equally contentious and indeed long running geopolitical event with some pretty big actors behind the main protagonist.

So, as I said earlier, people will certainly be watching, but in the short run, frankly, the fact that India’s oil bill is going to get much cheaper, that seems to be where it is heading, will provide a pretty heavy counterweight to any geopolitical uncertainty.