Asian mkts could correct 20-25%: Bank Julius Baer

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Asian markets fell today. Hong Kong's Hang Seng tumbled  2.58% or 717.15 points at 27,054.06.

Japan's Nikkei fell 1.29% or 196.09 points at 15,015.43. Singapore's Straits Times slipped 1.29% or 44.52 points at 3,393.75. Taiwan's Taiwan Weighted dropped 0.38% or 33.25 points at 8,647.61. South Korea's Seoul Composite plunged 1.19% pr 22.23 points at 1,850.01.

  V Anantha Nageswaran , Head of Investment Research at Bank Julius Baer  answering a query on how much correction the Asian markets could see on the back of the renewed credit concern said, "Most of the Asian markets particularly in Southeast Asia, including Hong Kong and China do face a risk of somewhere between 20%-25% correction in the course of the next several months."

 

Excerpts from CNBC-TV18's exclusive interview with V Anantha Nageswaran:

 

Q: One gets the sense that there is a huge problem just about knocking on our doors, what is your sense, how do you think Asia will take to the renewed credit concern?

 

A: I think Asia is more likely and that too really the momentum markets of the last few months or years will probably unfortunately take it on the chin because the problems are not coming to us in one go but they have been released in smaller installments.

 

There is going to be no clear indication that the problems are behind us unless the US banks agree to disclose all the material risks they face now, and that they are likely to face by giving higher provisioning for the potential loan losses.

 

As long as they do not do that this uncertainty would drag on, similar to what happened in Japan in the 90's.

 

Q: Which market do you think would be most impacted and do you think India could be one amongst them because it has been rather volatile for us as well?

 

A: If you notice, India actually has decoupled in recent times because Indian market correction has been somewhat more muted of course barring yesterday's drop and that is because I think the Sebi's action on the restrictions of P-Notes on derivatives has actually reduced open short positions through derivatives and has given enough room for domestic operators to sort of ramp up the market.

 

That is actually in a way ironically shielding India although one may not view that as a long-term healthy development.

 

Q: How much of a correction do you see in the Asian pack because of this uncertainty?

 

A: Most of the Asian markets particularly in Southeast Asia including Hong Kong and China do face a risk of somewhere between 20%-25% correction in the course of the next several months.