India and China Not a Safe Bet: Goldman Sachs

Goldman Sachs has issued a short-term alert over investing in India and China due to the impact of rising inflation, advising clients to rotate into Wall Street and other bourses as a safer bet over coming months, a media report said on Tuesday.

"We're not as tactically positive on the BRIC as we have been," said Tim Moe , the bank's chief Asia-Pacific strategist, referring to the quartet of Brazil , Russia , India, and China.

"To be frank, we may have held on too long to our overweight position in China last year. We have tactically reduced our weight. Asia is not in the sweet part of the cycle. The longer-term picture of Asia outperforming the US is taking a breather.

India is an even bigger worry, with yawning twin deficits, and overheating visible on all fronts. “India's current account deficit is running at a record pace of 4.1 % of GDP and it is 100% funded by short-term portfolio flows, which cannot be relied on indefinitely," said Moe, describing Mumbai's bourse as "crowded".

Kathy Matsui, Goldman's Tokyo strategist, said Japanese equities may be the best way to play the Pacific growth story since the average price-to-book ratio is 1.0, compared to 1.9 for China and the rest of emerging Asia.

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