High oil prices weaken Asian mkts: Subhodh Kumar

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Most of the Asian markets are down between a 1 to 2.5%. Speaking to CNBC-TV18 Subodh kumar , Chief investment strategist at Subodh kumar & Associates says that it is true that Asian markets are down on back of weak Wall Street cues but also due to other fundamental reasons like further bank write downs, tightening of interest rates and higher oil prices.

 

Energy with these high oil prices are starting to affect companies both in terms of their margins and peoples' concern in terms of consumer spending. So the immediate weakness is driven by energy.

  

Excerpts from CNBC-TV18's exclusive interview with Subodh Kumar:

 

Q: There seems to renewed concerns for the entire Asian pack and most of those markets are now down anywhere from about 1% to 2.5% a piece?

 

A: Yes, that's correct and this follows due to the Wall Street also being weak. There are several issues involved. The equity markets world wide including Asia recovered too quickly after March.

 

On the fundamental's area, the things that are affecting the markets are as follows; First, there is concern that the banks including Asian banks will have further write downs, the other aspect of course is that the Central Banks including the Fed have signaled that rate cuts are behind them and in Asia also further tightening is going to happen and last but not the least, the issue of high oil prices, in the US for example the airline industry has been saying that they probably would have losses due to energy prices.

 

Energy with these high oil prices are starting to affect companies both in terms of their margins and people's concerns in terms of consumer spending. So the immediate weakness is driven by energy.

 

Q: Can markets like Japan buck the trend since they are an export oriented market and their export growth has quickened to about 4%?

 

A: The hope for the Japanese is that they might be able to broaden their exports in to Europe and places like China for instance but the European slowdown may be a little bit delayed. The US is coming out with their retail earnings in the next few days and the reason the markets will not be able to buck the trend is that if the US consumer continues to weaken it would be hard for the Japanese exporters and others to buck that trend, so the best quality companies will be doing well here and the overall the export environment for Asia still depends on the US