See more bad news from US, Europe, Japan: Forsyth Partners

It has been a good pullback in the Asian markets today, most Asian markets did pretty well and the FTSE is actually up 1.2%, CAC is up 0.8% and the DAX is up 0.3%. So even Europe is not falling off too much at what happened with the US overnight.

Jacqueline Aldhous, Head of Emerging Markets at Forsyth Partners expects more bad news from the US, Europe and Japan. She said that money has moved from emerging markets to commodity funds. Aldhous added that the Indian valuations are more reasonable. She thinks that the domestic story is strong.

Excerpts from CNBC-TV18’s exclusive interview with Jacqueline Aldhous:

Q: What is your sense of what global markets could do over the next one-month or so?

A: It is very interesting because we have this huge conflict really, between maintaining growth and controlling inflation. I think a lot is going to depend on how effective the US rates seem to be as to whether there seems to be a panic measure or whether they really are committed to maintaining growth.

The key as well, is financial. Bear Sterns today concerns that it may have solvency issues which they are denying and the feeling is that there could still be some bad news - maybe out of Japan or from anywhere, whether it is in US, whether it is in Europe; I think this is the key. The uncertainty is over the growth versus inflation and what bad news there is to come from financials and that's what going to dictate the markets. So it is very hard to cool because we are very news-dependent right now.

Q: What about emerging markets, we have taken some support at the January lows to which most markets plunged to yesterday, how are you reading this pullback in emerging markets now durable you think?

A: Yes, it is interesting. We had a whole school of thought thinking that this time emerging markets had really decoupled from the US. My view would be really that it is more protected than it has been in the past because you really have very strong domestic demand stories, which are seeing maybe a percentage point knocked off growth, but not growth collapsing and the focus locally is to try and maintain growth. That is discredited to some point, but they do have some resilience. So I would say that they are dependent on the US, looking at the US. But maybe this time they will catch just a little sniffle rather than major flu.