Throughout the week, European shares traded weak owing to the Cyprus bailout issue. On Friday, the shares were heading for their worst week since November and the German government bonds were at 2013 highs, as Cyprus scrambled to avoid a meltdown of its banking system and a possible exit from the euro.
Jordan Kotick of Barclays is bullish on equities. "We are looking for a correction in equities in May and April. In most of the countries, it will be a buying opportunity, we just have to be prepared. We are coming up to a corrective seasonal period," says Kotick in an interview to CNBC-TV18.
Below is the verbatim transcript of Jordan Kotick's interview on CNBC-TV18
Q: We have seen some risk-off in global markets post the unexpected Cyprus deal over the weekend but how exactly are you reading the global equities now in terms of a movement?
A: We had seen some risk off in the last 24-48 hours. We remain bullish on equities but you have to remember where you are bullish on equities, more important than when. In some countries, the equity markets are not strong and in some, they are strong.
We are looking for a correction in equities in May and April. In most of the countries, it will be a buying opportunity, we just have to be prepared. We are coming up to a corrective seasonal period.
Q: What would your view of a buying opportunity be predicated on, do you think the risks of contagion are overrated in the euro zone?
A: There have been significant events in Europe for the last 3-4 years even more significant than Cyprus and none of these events in Europe had derailed the equity bull market that has lasted for four years. So, there is nothing at Cyprus or the European Union, which is going to derail the bull market based on the evidence of the last few years.
The events over the weekend are taking a market that has been rallying for 3-4 months without a correction. It is likely to give equities the excuse they are looking for to take some risks-off the table. Cyprus gives an excuse but the last few years have not been derailed by what is going on in Europe neither should Cyprus derail the longer-term bull market that is currently in place.
Q: What about the US markets because the S&P has been on a tare and has been at an all time high sometime back despite the fact that we have seen some amount of profit booking seep in now, do you see significant downside risk for the US equities and if yes, then to what extent?
A: You have thrown a lot of things at the US equity market in the last four years from fiscal cliffs to Budget impasses to Presidential election to the problems in Europe and none of that has taken away from the bid in the equity market in the US. The transportation average broke the all time new highs, couple of months ago the smallcaps broke to all time new highs. So, we do foresee a correction in April and May and the US stock market has had a correction in April and May every year for the last 3 years and the breadth is a little bit extreme. But last year's correction was only 11 percent.
We are looking for a correction but we do not think the US equity markets are going to be entering a bear market, they are in a bull market. The corrective risk will be a buying opportunity once we get through over the next few months.