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“We should start to see money flow in terms of the capital account into the EMs as well as money flow from financial flows and expect that to happen sometime in 2014,” says Andrew Economos in an interview to CNBC-TV18.
Andrew Economos, JPMorgan AMC does not foresee more fund outflows from emerging markets (EMs) and has become a bit more optimistic on India now. He believes the Reserve Bank of India (RBI) has shown some leadership in controlling the rupee volatility after policy paralysis by the government.
He told CNBC-TV18 that US may perform better than most other economies and in terms of real economic growth going ahead. “We should start to see money flow in terms of the capital account into the EMs as well as money flow from financial flows and expect that to happen sometime in 2014,” he added.
Below is the verbatim transcript of Andrew Economos's interview on CNBC-TV18
Q: What is your view on Bernanke’s testimony on Wednesday? The asset markets have reacted mixed. What will be the key takeaway for this quarter? Will some funds continue to move away from emerging markets (EM)?
A: Bernanke is walking that fine line between satisfying both the doves and the hawks and realising that in this bully pulpit, as head of the Fed he has tremendous clout over with government policy as well as what financial markets will do.
He is the only leadership in the US at this point and globally in terms of the other central banks. As a result, he has to be extremely careful of what he says and this mix message was a direct result of that. He also understands that you still have a fairly weak US economy and anything holding up the US consumer is the fact that stock market prices are pretty high.
Also, you have recovery in the housing market which means increased confidence and if you have those things slowed down then the consumer slows down. Why is that relevant to EMs? You are not going to see fund flows.
You are not going to see economic recoveries really ignite in the EMs unless you can get the US economy going. So, it does have an impact both in terms of real economic growth as well as financial fund flows and capital market flows to the EMs.
We expect the US to be better than most and in terms of real economic growth, we should start to see money flow in terms of the capital account into the EMs as well as money flow from financial flows, from portfolio flows into the EMs. We expect that to happen later in the fourth quarter or sometime in the 2014.
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