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JPMorgan Bets Big on India

The US banking giant aims to expand its businesses covering clients, as well as resources that provide global support to the firm…reports Asian Lite

Bullish on India amid robust growth and positive investment sentiment, American financial services major JPMorgan Chase & Co intends to keep growing its operations in the country.

According to JPMorgan CEO Jamie Dimon, there is a substantial opportunity for the fastest-growing economy in the world from the shift in supply chains from China, though the transition will take several years.

Meanwhile, the country needs to further build its manufacturing ecosystem and ensure scalability to gain from the “China Plus One” strategy.

Sjoerd Leenart, JPMorgan’s Asia Pacific CEO, was quoted as saying that India is still firmly in the top three, possibly top two in Asia, together with Japan.

There has been a flurry of activity that makes India a “super exciting place to have a large team on the ground”.

The US banking giant aims to expand its businesses covering clients, as well as resources that provide global support to the firm.

According to the government, the industrial and service sectors of the Indian economy are performing well, backed by brisk domestic demand and partially by tentative external demand. This can benefit India’s manufacturing firms as part of the China Plus One strategy.

As per a latest Finance Ministry report, factors like the ongoing recovery in the hotel and tourism industry, increased credit flow to transport and real estate segments, policy support, and robust investments in physical and digital infrastructure and logistics will help the services sector.

Meanwhile, S&P Global Ratings has retained India’s growth forecast at 6.8 per cent for the fiscal 2024-25, while reducing China’s economic growth by 0.2 per cent to 4.6 per cent in the calendar year 2024.

The rating agency also retained India’s growth forecast for FY 2025-26 at 6.9 per cent. Meanwhile, it further reduced China’s GDP growth to 4.3 per cent in the calendar year 2025.

The July budget confirmed that the government remains committed to fiscal consolidation and to keeping the focus of public expenditure on infrastructure.

In Budget 2024-25, Finance Minister Nirmala Sitharaman allocated a total of Rs 11.11 lakh crore for capital expenditure. The central government also has set a target to bring down the fiscal deficit below 4.5 percent of GDP by FY 2025-26.

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JP Morgan warns interest rates could hit 7%

JPMorgan’s Monks said that, looking ahead, a number of factors could cause the central bank to hike rates beyond expectations…reports Asian Lite News

The Bank of England could increase interest rates to 7% as it tries to tame inflation, according to JP Morgan, which said the risks of a hard landing for the economy are also rising.

The U.S. investment bank expects rates to peak at 5.75% by November, but cautions that they could go higher “under some scenarios,” hitting as much as 7%.

The analysis from JP Morgan Economist Allan Monks comes as U.K. homeowners face a significant jump in borrowing costs as they’re usually linked to the central bank’s main interest rate.

In June, the central bank increased interest rates for the 13th time in a row, by 50 basis points — more than many expected — to 5%.

“Persistent surprises have intensified the pressure on the BOE to deliver significant additional policy tightening, and we now look for a 5.75% terminal rate by November,” Monks wrote in a note to clients dated June 30.

“We assume the BOE will pivot to a ‘high-for-long’ strategy with the intention of allowing the lags in transmission to finish off the job.”

He added: “This alone raises the risks of a hard landing next year, but we recognise that the policy rate required to control inflation is proving to be higher than most had expected.”

British consumers are facing a challenging environment, with increases in food, energy and mortgage costs hitting their wallets hard. On Tuesday, the Organization for Economic Cooperation and Development said the U.K. is the only country among the G7 where inflation is still rising.

Official figures for May showed that prices rose by an annual 8.7% in May — more than predicted by economists, and significantly higher than the BOE’s target of 2%.

JPMorgan’s Monks said that, looking ahead, a number of factors could cause the central bank to hike rates beyond expectations.

“High inflation could prompt a broader rise in inflation expectations as psychology shifts and a sustained wage-price spiral sets in. Even if longer-term measures remain anchored, elevated short-term expectations could also create a more persistent problem,” he wrote.

“This could force the BOE into raising rates above our forecast in order to ensure real rates turn sufficiently positive to short circuit this dynamic.”

In an interview with the BBC broadcast Thursday, BOE Governor Andrew Bailey acknowledged that people were “having to make very difficult choices about what they buy, what they need for their … lives.”

“We want to get … inflation back to where it needs to be, and then we can obviously assess what level … interest rates should be at going forwards,” Bailey said.

“It’s hard and … I understand very much the difficulties that people face — unfortunately, this is how we have to get inflation down,” he added.

“And what I will say is, if we don’t get inflation down, if it keeps going on, it gets worse, it really gets worse, and we’ll have to put interest rates up more.”

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