“Wow” moment still away for equity investors; manage with “like” for now  

It will take some time before Facebook comes out with different expressive buttons instead of simple “like”.  In a similar way, the world markets are gathering pieces here and there to re-build confidence, but they are still away from the ‘wow’ moment. Maybe , on an optimistic note, the ‘wow’ button for the equity markets would coincide with the start of the new look Facebook.

Actually, the equity markets are so desperate for a positive bend , they latch on to anything which comes their way forward to recovery. The latest relief rally again is on the back of the minutes of the latest Fed Reserve meeting pointing towards remote possibility of the US interest rates moving away from zero.

The second pointer was stability being seen around the crude oil prices which are near USD 50 per barrel, with one research report  suggesting USD 70 per barrel in a year. Anyway, for now, the markets look to be better shaped , but to suggest that it is on a steady glide path would be a mistake.

The trouble , this time is from the same BRICS club touted to be moving the world economy , not too long ago. When the going was good, they went and borrowed and may be bet on the high commodity prices as if there was no tomorrow. China, in an expansion mode then, was fueling metals, minerals and other commodities , egging the private sector explorers and miners in the Emerging Markets to borrow excessively. Their shift to consumption based growth is rather  slow while the world is so impatient.

  The latest presentation by the IMF at its joint meeting with World Bank at Lima, Peru says, the EMs have over-borrowed to the extent of USD three trillion.

So, even if consumers try to muster some courage and spend, the kind of cash generation that is required to service this kind of debt is simply not there in most parts of the EMs. In India too, huge amount of debt is piled up in the balance sheets of the private sector firms, which will not be able to listen to PM Narendra Modi, who wants them to take risks. In fact, they took risks and are now repenting. You want them to take more risks, that will be suicidal not only for them but for the banks which fund them. Ultimately, their losses would be taken by taxpayers, in some form or the other.

Let us hope, the investors and tax payers do not have to use the Facebook button to express sadness!        

Pic courtesy: Children's Film Society, India