Neutral on market, sideways move may continue: Macquarie

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Being neutral on the markets, Mark Matthews of Macquarie Capital Securities says the sideways trend may continue. "I don't see a breakout in either direction." Further, Matthews say that a lot of investor interest is seen in Japan and not Asia.

Here is a verbatim transcript of the exclusive interview with Mark Matthews on CNBC-TV18. Also watch the accompanying video.

Q: Are you feeling bullish or concerned about the general sluggishness in the equity indices over the last few weeks?

A: I don't really feel very bullish or bearish. I feel the markets are in the state of equilibrium. If you look at Asia, we have been trading sideways for the past few months, I don't sense they are on the verge of any big breakouts and at the same time, I just don't feel we are going to collapse either. So I think we could maintain this sideways trajectory for another quarter or so.

Q: We have been in this range for few weeks and you are suggesting that we would be there for many more weeks. What do you think are the potential triggers which could nudge this market globally out of a range?

A: Inflation would be a big one because a lot of people are worrying about inflation. If we saw inflation in China pick up very quickly and surpass the 3-4% range by the end of this quarter-it just went positive now-so that would be quite a significant move from 0 to 3-4%, then people would worry about China taking the liquidity away. But I think in general what would change the situation is that if we thought central banks globally were going to take liquidity away; I don't think we are at the stage yet. Overnight, I read the Head of the IMF was quoted as saying that it would be premature to implement exit strategies now because of the developed economies are not back on their feet and unemployment is probably going higher in the US, Japan and in Europe, so those would be some things that would take us down.

What could take us up? I guess it would just be if the earnings came a little bit better than expected, but I look at the velocity of our company and stock markets in Asia last year leads me to suspect that we have priced in pretty sharp recovery this year

Q: On the point of taking away liquidity, what did you make of the Chinese tightening last week the CRR hike? Do you think more will follow from China and India when the monetary policy happens in a week's time?

A: I can safely say that China has got a credit bubble because they had loan growth last year of something like 35%. I can't remember what was the loan growth in India; about half of that. So you see the Chinese have had this huge loan growth and they don't want this credit growth to metamorphosis into an asset bubble, so that's why they implemented the reserve requirement rate. But I think the Central Bank in China is not the kind of Central Bank that likes to shock the markets, they were pretty vocal in letting us know that this was going to happen. I don't think anybody is shocked by it and the market didn't collapse.

With India similarly the Central Bank historically has been a prudent one, so any impending rate hikes have been well telegraphed and have been imbued in the share prices already.