Asian market fundamentals look good: Eurekahedge

Rajeev Baddepudi, senior analyst at Eurekahedge says that fundamentals for Asia look good and he expects stable returns to make a comeback. He adds that emerging markets look stable and valuations look attractive. They seem to offer good opportunity, he says. 

He also says that equity focused funds have been doing well in India.

Excerpts from CNBC - TV18’s exclusive interview with Rajeev Baddepudi:

Q: How are you viewing the markets?

A: There were wild investor fears over inflation. We have seen volatility take control over the markets.

In July there were several other fundamental scenarios like the North Korean missile testing, the Lebanon crisis and supply restrictions in the Venezuelan production market in crude oil. What this has led to is basically a high level of volatility. Hedge funds, the usual suspects, the ones in it that were better performing in the two months were market tutorial strategies and pair trading strategies, that is arbitrage funds, relative value funds etc. The other ones like the long short equity, the equity focused ones or the commodity focused ones, commodity-trading advisors were badly hit.

But one positive thing though, if one looks at the index performance over the past three months, it has been getting better progressively. If one looks at Asia Ex- Japan index, May’s returns have been minus 1.7%, in June it came down to minus 1% and in July it was just 10 basis points negative return. So although all have been negative, what we see is a betterment of the returns over a three-month period.

Q: Year to date you have done around 4% on Asia while overall emerging markets you have done considerably better. How is it looking now? Did Asia surprise you in the last year and is that where you got it wrong?

A: It was more about when the correction would take place rather than if the correction would take place. So in that sense there was a surprise in May and it was in excess a bit, judging by the fact that in May there were a lot of the fund managers who were on vacation. We saw a lot of profit taking because of that as well. But we still maintain the stand we took in May. We expect more stable returns in the market as we progress because now the valuations look very attractive and all the fundamental factors have been in place.

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