Way too late to be getting out of stocks: SCB

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Asian markets are all in the red. Lim Say Boon , Chief Investment Strategist at Standard Chartered Bank said, "It is way too late to be getting out of stocks now." He told CNBC-TV18 that the risk reward equation does not make sense for you to be selling at this late stage

 

 

Here is a verbatim transcript of the interview with Lim Say Boon on CNBC TV-18. Also see the accompanying video.

Q: Your opinion- it seems like a dysfunctional market. Is the obvious choice for investors now to sell stocks and hold cash?

A: It is way too late to be getting out of stocks now, I think you would know that for months and months when I have been appearing on your show, I have been very bearish but now I think its way late selling. These sorts of losses we have seen on the markets now suggest that the risk reward equation does not make sense for you to be selling at this late stage.

Markets generally tend to see fund outflows at the highest when the markets are closed to their lowest. I am not saying that we had hit an absolute low for US or global markets, indeed there is real prospect of markets grinding even lower in coming weeks but we are very advanced in terms of the decline.

Also note that Paulson's bailout package is not necessarily dead yet. The Congress is likely to reconsider an amended version of the original bill later in the week. It is inconceivable to me that US Congress will adjourn until a deal is reached.

Q: But there is some sort of preventive action coming in for most Asian economies already for example Korea has already banned short selling, Taiwanese markets have also imposed some sort of restrictions on short selling, where do you think it is going to lead? Do you think like you just pointed out fresh New Year lows are still to be ticked in?

A: The bans on short selling is widespread, it is right across the world and that stands to reason because you can't have a ban on short selling in some markets. Because given the international nature of financial markets, if you ban short selling in one market, it can be taken to another market to be short, as a proxy. It would insane for you to sit around and wait for short sellers to hit your market. So, it's an understandable response but it is not a sufficient response.

What we still need to see perhaps are three or four things; one the bailout package in some form has still got to get through, two we need to break that vicious cycle of downward credit prices and downward stock prices and diminishing balance sheet, we have got the break that too. The US Federal Reserve has to 'bite the bullet' and cut rate aggressively from here and the other Central Banks in the world will have to join in as well.

Q: Another point the President Bush meets his economic team, do you see any statements from there, assuaging the markets from the President and of course if there is talk of a revised bailout plan coming with by participants support. Do you see that calming the markets down?

 

A: Yes, certainly a bailout package in some form and as has been suggested by House majority leader Mr. Steny Hoyer saying that the senate could vote on a package on Thursday and send it back to the House for reconsideration. That would be a positive move that will help to sort of break the gloom that we have been saying. The lawmakers from both sides of US politics have recognized, if they did not recognize this two days ago, the blood shed on the markets now would clearly have convinced them that they cannot adjourn until a deal is reached.

 

 

 

 

 

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