Investors should consider political risk in markets: Michael Hasenstab

India and Indonesia might be two economies with current account deficits and struggling currencies, but Hasenstab said that they are still “the type of investment we are looking for.”

India’s current account deficit, which measures the flow of goods, services and investments into and out of the country, has largely been affected by rising oil prices because it is a major importer of crude. The current account deficit of India, Asia’s third-largest economy, widened to $15.8 billion, or 2.4 percent of its gross domestic product, in the April to June quarter.

Tuan Huynh, Deutsche Bank Wealth Management’s chief investment officer for Asia Pacific, wrote in a recent report that Indonesia’s current account deficit “makes it prone to a funding crisis.” He noted that its deficit widened to $2 billion in July, the largest monthly deficit since July 2013.

Meanwhile, both the Indian rupee and Indonesian rupiah have recently dipped to new record lows as emerging markets around the globe took a dip on concerns spurred by troubles in Turkey and Argentina.

Yet despite those data points, Hasenstab expressed optimism.

“We still have a very long-term positive view for both India and Indonesia. And we talk about a current account deficit, but really, both of those countries have dealt with oil at a higher price,” he said. “Both countries are pursuing some very sound, be it fiscal policy, or in India’s case, really revamping the monetary system … inflation targeting, tax reform.”

In fact, Hasenstab said, many of those issues for India may negatively impact growth in the short term, but they will ultimately benefit the country’s economy.

“That’s the type of investment we are looking for. It’s okay in the short term if there are some hiccups, if the long-term anchors are there, ” he said. “And I think both India and Indonesia have that long-term anchor.”

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