SENSEX NIFTY
Sep 16, 2013, 04.32 PM IST | Source: CNBC-TV18

Mkts prepared for Fed tapering; prefer PIGS now: SocGen

Patrick Legland of Societe Generale says that among European markets, he is now preferring the peripheral nations like Portugal, Italy, Greece and Spain as they are gaining in terms of competitiveness.

Lawrence Summers' pulling out from the race for the next Fed chairman is positive news for the markets, says Patrick Legland of Societe Generale. Speaking to CNBC-TV18, Legland says that the leading contender for the title, Janet Yellen, has a good working experience in Europe and is well-known by the markets.

“On the other side, it is very clear that the Fed will have a smooth communication in terms of tapering. The Fed has prepared the markets. Overall, we would expect the week to be good for risky assets this week and the rally to continue,” he adds.

Additionally, he says that among European markets, he is now preferring the peripheral nations like Portugal, Italy, Greece and Spain (PIGS) as they are gaining in terms of competitiveness.

“They have the lowest valuation across all assets in Europe and last and but not the least, if we continue to have relatively positive figure for the European economy, they have the highest potential leverage,” he highlights.

Below is the edited transcript of Legland’s interview to CNBC-TV18.

Q: How do you think the US markets will react to the news that Larry Summers is out of the race for the chief of Federal Reserve?

A: I think all of this is positive news for the market. From what I am told, the new Fed chairman Janet Yellen is very well-known by the markets. Also she has been working in Europe so it is obviously very good. On the other side, it is very clear that the Fed will have a smooth communication in terms of tapering. The Fed has prepared the markets. Overall, we would expect the week to be good for risky assets this week and the rally to continue.

Q: The European markets are at the highest level that we have seen. For example, the CAC is at the highest level since 2011. If you had to choose between an emerging market rally versus developed market rally, where do you think there would be further upside now?

A: At this stage, European markets are still catching-up. They are still relatively really cheap particularly for peripherals on one side. On the other side, this is far too early to come back on emerging markets (EMs) as there are still some key question marks in terms of fiscal imbalances, question on the currencies. In the short-term, we are positive on European equities and still cautious on emerging markets.

Q: Within European markets, what would be your preferred markets? We have seen the German DAX hit an all-time high, the CAC is also close to 2 or 3 years high.

A: We are not concerned by the fact that France or Germany are at the highest level because they are catching up the delay. However our preferred markets remain peripherals Spain, Portugal, Greece, Italy because these countries are gaining in terms of competitiveness on one side. They have the lowest valuation across all assets in Europe and last and but not the least, if we continue to have relatively positive figure for the European economy, they have the highest potential leverage.

ADS BY GOOGLE

video of the day

See 7% GDP by FY17; like pvt banks, autos: Kotak's Prasad

Explore Moneycontrol

Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of moneycontrol.com is prohibited.