Robert Parker, vice chairman, Credit Suisse Asset Management feels taht the upside in global equity markets is more pronounced than the downside. However, he pointed out that it is disappointing to see the performance of the 30-share Sensex this year, which is up by only 1.5 percent on year-to-date basis.
In an interview to CNBC-TV18, Parker said , "there are good numbers from China in terms of growth, we like to see clear evidence that Indian growth will move back above 6 percent. I do think that is going to happen and the market will rally, but it will probably under perform China given the deficit and growth questions."
Below is the edited transcript of his interview to CNBC-TV18.
Q: What is the result of this upmove that we are seeing in the European equities at this point in time? How much further of an upside do you see now?
A: We saw some significant developments this week. First, indication from Federal Reserve, European Central Bank (ECB) and Bank of Japan (BoJ) that we will go through another round of monetary easing and a clear statement from the Fed that quantitative easing at 85 billion a month will remain in place for at least whole of this year. Though we did not see any cut in interest rates yesterday but that there were indicators from Mario Draghi that ECB policy will remain easy and may get easier.
London Interbank Offered Rate (LIBOR) is only 13 basis points. We saw a big move in Japanese Yen in last few days it is trading at are 95.5 against the US dollar. The developed economies expect monetary policy easing which boosted the markets.
Despite cautious words by Mario Draghi yesterday, the recent improvement in economic data from Germany against the background of good economic data despite the sequestration coming out of the United States. Last month Japan saw a clear upturn in economic data after very weak fourth quarter in last year. So, good economic data, easier monetary policies, investors reducing cash positions and moving back into markets.
Q: How much of an incremental upside do you expect to see for global markets itself and do you think this is a stealth rally that could exhaust itself on the upside or is the beginning of a much more concrete bullish trend in global economies?
A: We saw very interesting technical position, where the equity markets were overbought by the end of January. It was not surprising to see the market consolidate in first 10 days or two weeks of February, against the background of some market fear over Italian elections and market fear over American sequestration on pubic expenditure.
Technically, today the equity markets are not overbought and we are not moving in a straight line for the rest of the year. If one takes a six months view the upside in global equity markets is more pronounced than the downside and my central case would be that by the end of September, early October we would be looking at global equity markets – if one defines that as MSCI World, around 10 percent than where we are now and if I am wrong it may well be higher than that.
Q: There is some fear that among Brazil, Russia, India and China (BRIC) nations India will be at the lowest rung of the ladder because of the macro issues that we are facing with respect to current account deficit and growth. Do you believe that if money has to come it may not come to India, but it may go to other markets like China etc?
A: This year we have seen underperformance in Brazil and India. Infact it is quite interesting amongst emerging markets. The smaller emerging markets have done well. Brazil has been the worst emerging market this year where the equity market is down 3.5 percent. The performance of the 30-share Sensex this year is up only about 1.5 percent year-to-date (y-t-d) which is disappointing. The Shanghai Composite is up only two percent and one has to look at some of the smaller markets like the Philippines, Indonesia and Thailand to see where there have been very strong gains.
India's poor performance this year is in line with development in China and it has outperformed Brazil. Foreign investors have some concerns about the current account deficit and the speed at which the Budget deficit is being addressed. On growth, there are good numbers from China, we like to see clear evidence that Indian growth will move back above 6 percent. I do think that is going to happen and the market will rally, but it will probably under perform China given the deficit and growth questions.
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