SHOWS: HONG KONG, CHINA (February 27, 2013) (REUTERS - ACCESS ALL)
ALICIA GARCIA-HERRERO, CHIEF ECONOMIST FOR EMERGING MARKETS, BBVA
1. REPORTER OFF CAMERA SAYING:
"What are you assuming on the Fed's quantitative easing program now following Ben Bernanke's congressional testimony this week? And what impact does it have on emerging market growth?"
2. ALICIA GARCIA-HERRERO SAYING:
"Well, of course there's been a lot of noise with basically playing with the idea that the QE3 would not last as long as we had all expected. I would start by saying that I think the Fed will kind of correct that message towards stability for the time being. So I would expect better news to come very soon. And that means that for the emerging world, we will go back to the idea that this is going to last. However in the minds of everybody who is investing in the emerging world, there is this idea that QE3 is not there forever. Which means that the risks entailed will have to be taken into account. But again, I think the impact will be muted with better news to come very soon."
3. REPORTER OFF CAMERA SAYING:
"Property concerns in China again with banks turning cautious on the nation's housing markets. The latest announcement came from China's Ping An Bank banning its branch from approving home loans. What are your thoughts?"
4. ALICIA GARCIA-HERRERO SAYING:
"We've been analyzing the announcements and frankly, if one looks at them carefully, there's not really much news there. I mean, these are measures that had been announced before. Of course the key issue is whether they will be enforced more tightly than they were. And that will have an impact on of course the housing market. My feeling is that the Chinese authorities, as opposed to Hong Kong by the way, do not want to break the good environment in the housing market. We can't forget that it had been bad for quite a long time. And I think the only thing they want to do is to avoid excessive growth in prices. But just let them grow slightly over time. So I would not again consider this news to be very negative for the housing market. I think growth is still an issue in China. They want to promote growth - that's the key message. And we've seen that in many ways. So, the housing market is a very important engine of growth in China. And I don't think the measures again are so tightened as they look. So I would not expect major changes so far."
5. REPORTER OFF CAMERA SAYING:
"The top three emerging markets to grow the fastest this year - what are your picks?"
6. ALICIA GARCIA-HERRERO SAYING:
"Top emerging markets this year. In Asia, I always like to talk about what I consider to be like Cinderella of Asia which is the Philippines. There's been a nice surprise. Not only last year, but there's been a nice surprise for last few years. I think the government has improved in terms of corporate governance. And I think they are attracting more FDI than they used to. They have a generally well-educated population in terms of language skills and even third degree level compared to other Asian countries. So I think they will still attract FDI and they will do well this year. The macroeconomic management in the Philippines has improved enormously in the last five, six years. So I think that is a nice bet for investors. And again it's nice because it's been cheap for a long time. And it's been like not regarded as a key country in the region. In Latin America, I think this is the year of Mexico. They have new government, they really want reforms. And Brazil is still struggling to improve its growth projections and pattern for 2013. With a very bad year 2012 they didn't even manage to grow 2%. So I think Mexico has a goal this year to attract FDI. They've always attracted a lot of FDI. But I think this will be their year in terms of, again, reforms and huge amounts of flows into Mexico. The risk is of course excessive exchange rate appreciation. The peso may fly. They have a very, very flexible exchange rate regime. So that's the trick. But for investors, if they enter early enough, that's a double bet, positive bet for them. I think these are the key countries I would recommend at the moment."