Rally to last for few more weeks: Asia Pac Asset Mgmt

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Most of the Asian markets are range bound. Except Nikkei all other Asian markets were in the red on account of profit booking after the last two sessions.

James Chirnside, CIO at Asia Pac Asset Management believes that the rally we are currently witnessing is in response to significantly oversold markets and also to do with the flexibility of the Central Banks and their willingness to cut rates to whatever levels in order to stimulate activity.

He adds that we could be in for a bit of a rally for another few weeks at least. With regards to US Presidential elections a lot of the policy measures are probably on hold until the decisions on the vote.

Here is a verbatim transcript of the interview with James Chirnside on CNBC TV-18. Also see the accompanying video.

Q: How material is the US election on Asia currently? Where do you sense we are currently in this entire bear phase in terms of the pullback, is this just another bear market rally?

A: In terms of US Presidential election, I think there must be policy on hold in Washington. Also emergency measures considering the financial bailout have been dealt with. But a lot of other policy measures are probably on hold until the decisions on the vote, so we will have to wait for that.

In terms of the rally that we are seeing at the moment, I think it is in response to significantly oversold markets. It is something to do with the flexibility of the Central Banks and their willingness to cut rates to whatever levels in order to stimulate activity.

We might be through the worst of the US mutual fund redemption selling. If that is the case, then we can see little bit of stability reenter the markets and we could be in for a bit of a rally for another few weeks at least.

Q: In the last two months of this calendar year what is your sense on how things would pan out for the market?

A: I believe that we are in the midst of a recovery rally here.  I think that some stocks have become so cheap that they are incredibly attractive. A lot of investors, who have been sitting on lot of cash although mutual funds and those sorts of things have been redeeming but institutional investors, insurance companies and banks they have been stopped piling large amounts of cash for redeployment into the markets and I think we are starting to see some of them being redeployed now.

So, I would expect in the next couple of months a bit more of a rally. I think as the dire economic news begins to surface in the US, as we saw last night with that very-very sharp slide down in Truck sales and as that spreads further to Europe, the markets are going to find it increasingly difficult to rally.

I would expect early next week we will see a bit of a rally through the end of the year. Then we will see fair bit of sideways action, perhaps a little bit of selling but nothing like what we have been seeing over the last couple of months.

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