US rate hike would be ‘mixed blessing:’ StanChart

Reporting by Martin Soong, writing by Dhara Ranasinghe
Stanchart: US rate hike will be a 'mixed blessing'

A rise in U.S. interest rates would be a worry for the markets in which Standard Chartered operates but would also bring some positives, said Jaspal Bindra, the Asia CEO of the emerging-market focused bank.

"From a business point of view, it [a rate hike] will have an impact as we saw in May of last year and the period after that," Bindra told CNBC on the sidelines of the World Economic Forum in Manila.

"For the bank, we have surplus liquidity so an increase in rates will be a shot in the arm to the bottom line and so that will be a mixed blessing," he said.

"The other mixed blessing is that a rate rise will come with some substantial evidence of growth in the U.S. which will help export-led economies in this region," Bindra added.

StanChart said earlier this month that currency volatility in Asia hurt its first-quarter earnings and that market conditions would remain difficult.

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That volatility was sparked a year ago as expectations for an unwinding of U.S. monetary sparked an exit of cash from emerging markets.

Philippe Lopez | AFP | Getty Images

Markets in India and Indonesia, the two hardest hit Asian countries in the emerging market rout, have stabilized in recent months although the specter of a tighter U.S. monetary policy continues to hang over emerging markets in general.

Asked if he expected a fresh exodus from emerging markets once the Federal Reserve starts lifting rates, Bindra said: "There's going to be a mixed reaction. With the elections in India, Indonesia, we see that some of the capital flows are coming back."

According to Reuters, foreign investors have piled over $16 billion into Indian stocks and bonds in the past six months and now hold over 22 percent of Mumbai-listed equities.

The Fed has been winding back its asset-purchase program since December and many analysts expect the central bank to lift rates not too long after that tapering ends.

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Minutes released on Wednesday from the Fed's last meeting showed that officials discussed a rate hike but agreed the discussion did not signal a move soon.

The Fed lowered its key interest rate to a record low of 0.25 percent in 2008, during the global financial crisis, and has kept it at that level since then.

Talking about elections in India and Indonesia, key markets for the London-based bank, Bindra said he was positive about both countries.

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India's opposition Bharatiya Janata Party last week won a general election by a landslide, boosting expectations that a new government will deliver key reforms and revive India's growth prospects. In Indonesia, a presidential election takes place in July.

"It's fantastic, it's clearly pro-business, so it's going to be good for the economy," Bindra said, referring to the BJP win. "They are not tested in recent times in government but they are making the right indications about the economy."