Robert Doll, chief equity strategist, Nuveen Asset Management believes the worst is over for the emerging markets. However, he adds there can be more selling in the EMs but most of them have been weak for some good reasons.
Since emerging market currencies are seeing stability, Doll expects equities in these markets to do better.
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Doll further adds that markets have already discounted the Federal Reserve tapering and therefore, it is unlikely that there will be any major pain regarding that news. “I don’t expect we (EMs) will have bouts of illiquidity that caused some of the steep sell offs in the last few months,” he adds.
Meanwhile, he says India still needs some more time to stabilise before global investors start investing there.
Below is the verbatim transcript of Robert Doll’s interview on CNBC-TV18
Q: Emerging markets (EMs) have started to stabilise in the last couple of weeks but some experts believe the pain could resume once taper begins. Do you think the worst is over for emerging markets?
A: I think the worst is over for EMs. That doesn’t mean we can't have some more selling squalls but EMs have been pretty weak for some good reasons. The long term story of faster growth for population, faster growth for consumption of middle class means that the market will still grab hold of these discount valuations. We have stabilised currencies in a lot of places and that is the first signal that we take a shot at risk assets and equities in doing better.
Q: How severe could the Federal Reserve (Fed) taper program be in your assessment and has the event been discounted by the markets?
A: We've been talking about Fed tapering now for several months. So markets, be it developed or EMs kind of knows the score. The question is when and how much. Let us presume it is soon and a modest amount. The market expects that and so, I wouldn’t expect any big dislocations. The noise, the uncertainty and consternation around that issue, we have already paid the pain.
Q: With regards to the global liquidity landscape change over the next two weeks, do you see risk assets like equities sell off towards the end of 2013?
A: Liquidity is very important to understand where risk assets and EM equities in particular are going. We had some liquidity problems in the last few months and have got over most of them. Some of them were related to Fed tapering and now we can get our arms around that problem, I don’t expect we'll have bouts of illiquidity that caused some of the steep sell offs in the last few months.
Q: How are global investors approaching a market like India? We have seen a dramatic rebound from the August lows but are global investors interested in investing in India at current levels?
A: India had more than its fair share of volatility compared to other EMs. We haven't seen a long period of attempted stabilisation for global investors come into India. We need more time with stabilisation before they go there. They will get there but maybe not just yet.