Nov 21, 2011, 05.17 PM | Source: CNBC-TV18
In an interview with CNBC-TV18, Johann Santer the COO of Superfund Financial India Pvt Ltd says the inter-dependence of global markets is what has led to the global crisis.
In an interview with CNBC-TV18, he says the inter-dependence of global markets is what has led to this crisis. He sees a very tough road ahead for stock markets.
From the commodity space, he is extremely bullish on gold and advices his investors to remain invested in the yellow metal. He expects gold to touch USD 3,000 per ounce in the next couple of years.
Below is an edited transcript of his interview. Watch the accompanying video for more.
Q: What is your position on India?
A: Generally speaking, itís a difficult year for any equity market regardless of developed economy or emerging market, regardless of India, China or the Eurozone. What we can see of course is that the emerging markets have been driving the last major recovery in the equity sector but also the volatility is certainly higher in India.
In the long run, we are certainly positive for the Indian economy. For a short view, we definitely are overweight commodities in our portfolio rather than recommending to our clientís long only strategies in equities and also regardless of the geographical area.
Q: You have linked your fund performance to the performance of gold. Does it pay to even get long on gold at this juncture? Are there any levels you are looking at in the next six months?
A: Regardless of the price, we recommend our clients to look at gold. We donít believe gold would be overpriced at the current level of trading around USD 1,700 per ounce. Our mid to long-term price goal is USD 3,000 per ounce within the next two to three years. We started investing in gold when gold was trading at USD 470. At this stage, we see with all the re-flationary methods that have been taking place around the world that commodity prices, especially, gold being quite a special commodity in my opinion can only lead higher in the next few years.
Q: Brent has given up some of its gains now after a fairly firm year in 2011. Where do you see Brent headed? Are you expecting a lot of gains for a six month investor? Is there money to be made in this commodity?
A: I would say probably yes. I would say the return of oil has been also quite tremendous. We saw a very hard landing in 2008 when oil was trading at one point of time at USD 147 per barrel but also the recovery since then has been quite steady. Oil definitely will have a very strong bias from economies around the world.
So it will depend on China, it will depend on India, developed economies and their outlook. If they can solve their problems oil can probably go higher. Gold is a little bit special because it even became like a safe haven somehow in this financial crisis and its definitely deferring to the oil sector.
Q: What is your view on what is happening in Europe? Could we possibly reach a consensus now that we have seen some amount of change in the political scenario etc? How exactly would you be placed in terms of the entire scenario that is playing out there?
A: In our portfolio we are fairly diversified. With one program we trade global commodities and financial markets long and short and for another one we would go along equity, but we would obvious hedge with the respective market. We only also invest in small amounts of money into one particular stock or into one particular commodity. We always try to be hedged as we donít know what will happen exactly in the future.
Its certainty good news that the major European economies are trying to solve their political issues, trying to get a stable government in place which hopefully will also give a strong confidence into the euro and also into the Eurozone down the road. At this stage, itís certainly too early to say where we are at this moment with this crisis in the Eurozone and how long it will take. We are quite cautious and have diversified investments at this stage in the markets.
Q: You say that you donít see equities as a very strong asset class but you are positive on commodities. Would not a weak equity market, indicating weak economic fundamentals, also weaken at least some industrial commodities like copper or related base metals?
A: Absolutely. Many commodities will be driven by demand of global and emerging economies. At the end what we also see is that when governments around the globe try to fix their problems, the money printing machines of course are still on for the last couple of years and this will at one point of time lead into inflation and commodities will be the first benefiters from this scenario. When this will take place if it will be in six months, one year, two years, three years, we donít know. We are just certain that it will come at one point of time and for this we want to be positioned in commodities and also for our clients we feel that this is the right choice.
Q: Within equity markets if and when you position yourself for a rebound, what would be your hierarchy of the market?
A: We are trading global equity markets which are still because of liquidity reasons and because of the exchanges that we can access itís mainly in developed countries at this moment. We are strongly eying all the emerging markets and hope that we can position ourselves there very soon. At this stage, we are trading 2,500 stocks in the global developed markets. We have exposure to the Indian equities through the equity index future and we hope that we can expand our portfolio very soon there.