SHOWS: SINGAPORE (JANUARY 6, 2014) (REUTERS - ACCESS ALL)

LEIF ESKESEN, CHIEF ECONOMIST (INDIA & ASEAN), HSBC GLOBAL RESEARCH

1. (QUESTION GRAPHIC)

'Will the strength of the U.S. dollar weigh on the Indian rupee and other emerging markets currencies?'

2. LEIF ESKESEN SAYING:

'Well I think of course the INR (Indian rupee) is still somewhat susceptible to changes in global financial conditions, because despite the reduction we have seen in the current account deficit, it remains sizeable. Still with, India still depends more so than other emerging markets; not all, but some of them at least, on external funding. So of course they are susceptible to changes in that with the Fed tapering now underway, although in a more controlled manner, and that of course poses risks for India in that front. I would say however though, I wouldn't suspect that we are going to see the same type of gyrations we saw over the summer. I mean since then the current account deficit has narrowed notably. Funding conditions have improved. And yes Fed tapering is underway, but it's not being executed maybe in a more draconian fashion that a lot of market expects, a lot of market watchers were fearing over the summer. It's gradual tapering we are looking at. The Fed wants to be cautious about getting yields up in the U.S. and manage that very diligently. So I think we will not see the same sort of disruptions on that front. I would also suspect if the currency does get under more pressure as we saw over the summer, there would be a policy response to that, that would help alleviate some of the volatility. So it's probably going to hover around current levels. The level of volatility would be lower than what we saw over the summer. On balance, probably a bit of a bias to the downside to the currency, but not to a great extent, but volatility of course in the short term will be there.'

3. (QUESTION GRAPHIC)

'Will the rupee maintain its outperformance in 2014?'

4. LEIF ESKESEN SAYING:

'I think as I mentioned earlier that the INR is still relatively, shall we say, vulnerable compared to some of the other currencies in the emerging market space. You know as I said earlier, India still has a high current account deficit, it's not as sizeable as it is for example in Turkey or countries like that, but it's still sizeable nevertheless. So I think it's still in the group of, shall we say, currencies, EM (emerging market) currencies that are relatively more vulnerable because of the external position. But as I mentioned earlier, relative to where it was this summer, things have improved and that suggests that we are probably going to have somewhat less volatility on that front. But I think, so you need to look at it from that perspective.'

5. (QUESTION GRAPHIC)

'What is your outlook for crude oil and gold in 2014?'

6. LEIF ESKESEN SAYING:

'Well I think gold, I don't think necessarily looks very promising. Obviously it's received some beating already now with, shall we say, Fed tapering on the way, shall we say, the prospects of returns on U.S. assets, whether it's equity and yields improving, that of course has not been a positive for gold. So I would still suggest that that is going to remain a challenging year for gold, for that commodity. Crude oil prices, I mean, with the global recovery likely to slowly shine through during the year, of course from the demand side, that would add a bit of a lift to crude prices, but I think at the same time, if you look at the supply side of things, there are things underway in that front that are also pushing things forward right. So that is going to, I would say, contain the uptick in crude prices. I don't really expect much of an upswing there even as the global recovery shines through. And also the global recovery in itself will be quite moderate, so I don't really think we should expect a very swift recovery on the global front. And therefore, in demand for crude and other commodities.'