Moneycontrol » News » Markets » Expert & FII Outlook

US bailout package not a panacea, say FIIs

Published on Fri, Oct 03, 2008 at 11:45 | Source : CNBC-TV18

Updated at Tue, Oct 21, 2008 at 15:50

Like this story, share it with millions of investors on M3

Share on Tumblr

Excerpts from Power Breakfast on CNBC-TV18 Watch the full show »

ALSO READ

Nifty

BSE | NSE 25/05/12

Are Mutual Funds betting on Nifty?

Foreign institutional investors (FIIs) are of the view that the new USD 700-billion financial bailout package passed by the US Senate is not a cure for all solvency-related issues.

Jim Walker , Managing Director, Asianomics , says: "There is a possibility of negative US GDP numbers starting this month," adding that there might be much weaker economic growth in 2009. "Also, the interest rates will fall sharply in Europe and the US. The balance sheets in the whole financial system in the West need to shrink," he said.

Kheim Do , Head of Asian Equities, Baring Asset Management , says he sees mild redemption activity. "The bailout package has obviously a lot to do with the housing sector in the US. I expect the European Central Bank will cut rates aggressively over the next six months. Hopefully other central banks around the world will follow suit," said Do, adding that the US Fed will also continue to cut rates apart from Bank of England, the Reserve Bank of Australia, People's Bank of China and perhaps also the Central Bank of India.

Stephen Pope, Chief Global Market Strategist of Cantor Fitzgerald, says the bailout will give some break to current market volatility, while Micheal Spencer, Chief Economist of Deutsche Bank, Asia, opines that the bailout may not materially impact economic fundamentals. He adds that a good part of the package will be used to inject equity into the banking system. "More bank failures in the US is inevitable," cautions Spencer.

The US Senate had passed a revised USD 700-billion bailout bill on October 1 to breathe life back into the paralysed credit markets with a 74-25 margin for it. Earlier, the Senate had turned down a blanket USD 700-billion package designed by US Treasury Secretary Henry Paulson to bail out ailing financial companies in the US, prompting Republicans to formulate the revised package.