See more Dubai-like skeletons tumbling out: Tyche Group

In an interview with CNBC-TV18, Stephen Gollop, Chief Operating Officer, Tyche Group, spoke about his reading of the market and his outlook.

Below is a verbatim transcript of the interview. Also watch the video.

Q: How are you reading the events since Friday? Do you think Asian Markets have correctly estimated that Dubai debt problem is not going to have very serious ramifications on emerging markets or is this only a technical correction?

A: The verdict is still out on whether this is going to be major correction or not following Dubai. There is still not a certainty of thing being shored up and then you still got a number of other countries. It shows that out there, there are countries bordering on having great problems and ignoring is certainly at your peril.

Q: Do you think this crisis has done enough to unearth some more skeletons from the closet? There have been talks about Vietnam and the crisis that the Dong will be facing and has it done enough to bring about that risk aversion trade again?

A: It depends on if anyone is actually looking at the skeletons. The skeletons are actually trying to come out but nobody actually finds them. If you look at Greece, for example, we just had the budget deficit going up from 4.6% to 12.7%, which is an enormous figure and that could well be the next Dubai the way things are going. So I think there are plenty of skeletons out there but people just don’t want to look at them at the moment.

Q: Do you think after the Dubai crisis people will start looking at them? Do you think that emerging markets as a group will now start beginning to see some lowering of FII flows coming in?

A: I hope not because if you were looking at anyway and I am just looking at Asia now and if anybody has got the good banking system it is Asia – apart from Canada and Australia maybe, if we look at Europe and US house problems and also many other areas. So I would hope that there won’t be a depreciation in the level of moneys coming in. But unfortunately human nature, we are seeing gold being bought again now and that is going to be money that is not going to go into equities. So it’s always as perceived as higher risk area, so don’t get. That would be Asia again and it doesn’t deserve it.

Q: With the emerging markets or the Asian basket, which countries would you say be vulnerable to this possible heard mentality of being a little wary and which countries might look more resilient?

A: Resilient is the easy one and that’s got to be China. We are still quite pro-China and if you want to retain your equity exposure that’s the key area for us. Outside of that it was going to be affected by the West because what we are really looking at is that Europe or US having a real problem and then Japan and other areas will have other problems as well. So it’s the same old thing where it’s not much so much our problem but we will get the bounce and probably get hit hard as being smaller economies.

Q: Do you have a tactical call on India?

A: India is neutral for us at the moment. The verdict is out – lots of verdict out on equities but certainly it doesn’t come far behind China. So if we are looking at areas at we look weight back into again then India would be in there.

Q: The 7.9% Q2 GDP number that came out an hour ago does that strengthen that theory that you just said?

A: Yes, clearly. The two countries of significance in terms of GDP, which is looking attractive, are China and India. It’s going to be seen if it’s maintained.