All talk & no action to make markets dull: F&C Investments

Since the start of the eurozone crisis, policy markets from Europe have made tall promises, but have yet to deliver on them. Recently, ECB chairman said that he would ‘whatever was needed’ to help support the euro. Yet, he announced no measures during the central bank’s policy meet.

The situation is similar in India as well. The government made high promises early on, but has yet to deliver on reforms and policy. Jeff Chowdhry, head of emerging equities at F&C Investments, tells CNBC-TV18 that the lack of action on policy front, both in Europe and back home, will hurt equity markets. “Even though talk was quite positive last week, the problem basically is that it still doesn’t deal with the problems of the actual crisis. So at the moment, the markets are enjoying, but I am afraid it won’t last very long,” he said. He hopes to see definitive action from European policy makers, which helps the currency bloc move closer to becoming a fiscal union. Even for India, Chowdhry says action from the government will encourage foreign investor to return to the market. Below is an edited transcript of his interview with Ekta Batra and Gautam Broker. Q: What exactly is taking place with regards to the probe on Standard Chartered and how detrimental do you think the effect would be globally for the operations of the bank? A: Obviously the details are very sketchy; at this point of time it is an accusation rather than backed up with any fact. So I think it is one of those things that are very difficult to make any specific comments on time until there is more information. Q: Angela Merkel today said that she is not really opposed to the bond buying programme. How soon do you think this can materialise? Do you see Rajoy approaching the EFSF for aid and Germany approving the bond buying say in the next few months or so? A: I think this is a follow-up to Mario Draghi’s comment last week, in which he said the ECB would do whatever is necessary. Since the start of this crisis, the common thread has been that talk has been very easy, very cheap, but very little action has been taken. Even though talk was quite positive last week, the problem basically is that it still doesn’t deal with the problems of the actual crisis, which is basically that it needs to be either full fiscal union or political union. So at the moment the markets are enjoying it, but I am afraid it won’t last very long. Q: Do you think we have topped out in terms of the euro at this point at around 1.24. Do you see further upside? A: I don’t see much upside from the current level. Markets were hoping last week that the central bank got a banking license or even cut interest rates. You have to remember that interest rates at 0.75% are actually higher in Europe than they are in the UK and the US, and yet they didn’t even cut that. Q: What about emerging markets, and in particular India. Do you expect any kind of a positive policy action in terms of actual on ground changes in the near-term? A: I have to say I have been fairly skeptical about this for a little while. I think it is a bit like taking a leaf out of the European politicians, because there is a lot of talk and very little action. I will be much happier once we see action and I think more foreigners will come back into the market.