In an interview to CNBC-TV18, Bobby Rakhit, CEO, Inside Consulting says the uncertainty will continue to play out in global markets for the next three months or so leading to some correction.
While cracks are beginning to show in the developed markets again, he remains optimistic on emerging markets, especially ASEAN economies like India, Malaysia and Indonesia.
“India is still a very good market to invest in but it’s going to take a backlash because of FDI flows but if you look at India in the long-term it’s still a very stable, very opportunistic market for a lot of people to get into,” he adds.
Below is an edited transcript of his interview. Watch the accompanying video for more.
Q: You must have tracked the newsflow overnight and what happened in the US. Clearly there was no great trigger but these are just growth concerns that have been weighing in EU, China, even some of the US data has been deteriorating off late. Do you think the market is just trying to find a reason to correct and we could be in a slight correction mode? Where do you see support coming in?
A: If I look at the overall markets particularly developed markets then they did shoot up in the early part of this year and we are going to see that correction continue going down for the next three months. There is a lot of uncertainty in the markets. A lot of people have played a lot of the valuations for a couple of stocks particularly the technology sector. That’s going to start getting back. I clearly see more correction in the next three months. There is a lot of uncertainty in the market.
Q: Do you expect the yields to shoot up further? What would be the fix? Would you expect something from the ECB by way of more bond buying?
A: I think so. Clearly, it’s going to be the newsflow for the next three months. It’s going to be what sentiment is in the markets and particularly if you do see a little bit more of government buying, taking a little bit more of the uncertainty in the markets that will definitely stabilise the markets.
But there are cracks and those cracks are starting to open up again. That is my main concern that over the next quarter what's really going to happen to these developed markets? Is it going to shoot down further? I can't see them having a rally and it’s definitely going to be doing downward.
Q: In the face of developed markets correcting, emerging markets (EMs) will find it difficult to hold their support levels. Do you see the EMs get back to the lows that we had seen the rally start from? Do you think there will be some resilience given the kind of growth profile we have which is definitely better than some of the developed markets?
A: Yes, absolutely. A lot of the emerging markets which have that sort of stability and growth and I know people are looking at China and they are counter playing in terms of the GDP numbers but that’s not really where the growth is. Where you have to start looking at are the ASEAN markets particularly Malaysia, Indonesia. These markets are still going to do very well. There is high demand, there is cyclical growth.
India is still a very good market to invest in but it’s going to take a backlash because of FDI flows but if you look at India in the long-term it’s still a very stable, very opportunistic market for a lot of people to get into. I clearly think these types of markets plus the ASEAN markets are going to do very well this year particularly the second half.
Q: Is there any specific instrument that you will watch like the German bunds or the French or Spanish yield?
A: The main thing to look at is consumer spending. That’s going to be the real trigger going forward and what is happening to the consumer. Particularly, those are the cracks we are seeing in the US is their sustainable growth and I clearly don’t think it is. There is the election period happening in the US and particularly in Europe we are going to see the same sort of thing.
Are these type of cracks going to continue to spread open or alternatively is the government going to intervene, help out and then we will see a shoot up in consumer spending. I don’t think that’s going to happen. Confidence is slowly regaining but how stable is that confidence that’s going to be the real question. So it’s going to be consumer confidence going forward.