Prefer developed market equities over emerging mkt's: NAB

The global markets have been under pressure after Bank of Japan took an aggressive move to increase the foreign flows. Weak US job data and worries from Portugal added to the fury.

Also Read: See significant upside in mkt, largecaps to lead: Antique Nick Parsons of National Australia Bank feels that weak economic data and no hope of improvement leads to a situation where developed equities outperform emerging equities. “I still think it is a case where preference for developed equities over emerging equities would seem to be safer, lower risk trade. That is going to be the theme for the next few days if not until the middle or the end of next week. I would suggest developed over emerging,” he says in an interview to CNBC-TV18. Below is the verbatim transcript of Nick Parsons’s interview on CNBC-TV18 Q: The nonfarm payroll numbers left a bad taste and the Asian markets are all in the red except for Nikkei, which is moving in its own orbit. What have you made of the numbers? Do you think the downturn in equities, especially US equities will be short-lived? A: The only theme which links all asset markets at the moment is one of economic disappointments. Sometimes those disappointments are greater, sometimes they are smaller, but for the last six weeks we have stopped having positive surprises and that is important. We are now arguing about the magnitude of the negative surprises and without doubt, last week was fairly major, both in terms of the purchasing managers index (PMI) numbers across all the major economies, in terms of the US employment reports and when what is up coming this week. It is a fairly light data calendar globally, but if you are bullish, there is not much scope for disappointment. If you are bearish that will come out as news to change the perception that has gripped the markets over the past few weeks. Perhaps, this negative perception will still dominate for a little while to come. Q: How do you approach the global equity markets given the context of weak economic data and no hopes in terms of an improvement? A: It is still a situation where developed equities are outperforming emerging equities. In India, the Sensex is down 5 percent year-to-date. Shanghai is down 2.5 percent. The major markets are still in green and against that background there is not enough news coming out that would lead investors to change that strategy. So, I still think it is a case where preference for developed equities over emerging equities would seem to be safer, lower risk trade. That is going to be the theme for the next few days if not until the middle or the end of next week. I would suggest developed over emerging.