Too late to go short in Asian markets: SCB

Excerpts from Power Breakfast on CNBC-TV18 Watch the full show » RELATED NEWS Asian markets to remain under pressure: Asia Pac Asset Mgmt See further slide in crude if $98/bbl breaks: Global Fin Asian mkts will use bad news to sell: Bank Julius Baer Minor bull market to emerge in Q2, Q3: Asia Pac Asset Mgmt Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

Asian markets continue to bleed on the back of Wall Street cues with South Korea down almost 6% and Japan's Nikkei down almost 5%. Lim Say Boon , Chief Investment Strategist, Group Wealth Management at Standard Chartered Bank , said "Whilst we do see lower levels in Asia, it is on a risk reward basis and it is too late to be going short the markets in Asia now."

Here is a verbatim transcript of the interview with Lim Say Boon on CNBC TV18. Also see the accompanying video.

Q: Your take on Asia, what if there is a 25 bps rate cut do you see that turning the curve for Asian markets not today but subsequently?
 
A: What we are seeing now is we have got front row seats to the global bear market show. I have been a regular guest on your show and I have been warning that we will still be approaching capitulation phase in the emerging markets and we will soon see capitulation on the US markets as well.

Capitulation is fairly well advanced in the Asian markets. It is not going to get a lot better soon, it is going to get real nasty. But this is not the time to be panicking; this is not a time to be selling. It's way too late to be selling especially for the emerging markets that are very advanced in terms of a decline.

Slightly different story for the US markets and the S&P 500 had been remarkably resilient against what has been going on all around the world. It has been remarkably resilient considering it is the epicenter of the global crisis. So, what we are saying now in the US is what we had been expecting i.e. bank failures. We expect more bank failures at the failure of Lehman should not have come to shock. Now the fear is that it might get a lot larger, there is some concern about Washington Mutual, there are been some concerns about AIG - I am not saying that they are in trouble but the markets are concerned about them. This is going to keep the markets very twitchy for days and weeks to come.
 
Q: Are you trying to say that it maybe just the tip of the iceberg for the entire Asian pack and we will witness new, year lows and what is the kind of exposure that you have in Asia currently?
 
A: We have been telling all our clients to be underweight on stocks generally on the general sort of basis. We have also been underweight on emerging markets and for Asia ex-Japan as well. So we are significantly underweight on this region. This is what we have been expecting.

It is not something we have take to joy in but here again I stress whilst we do see lower levels yet, but it is on a risk reward sort of basis, it is too late to be going short the markets in Asia now.