Fed tapering key to mkt moods, not debt ceiling: JPMorgan

Richard Titherington, CIO and head-EM Equity, JPMorgan AMC says he will focus more on the tapering of quantitative easing than the US debt ceiling which will occur in mid-October as the former is likely to have a longer-term impact on the market.

Also Read: USD likely to strengthen by year-end on Fed taper: Barclays

In an interview to CNBC-TV18, Titherington says the timeframe and the quantum of the tapering will play key roles in deciding the faith of the market.

Meanwhile, he believes the investment sentiment towards India is still fragile as the country still remains in a higher risk camp among other emerging markets due to its huge current account deficit.

Below is the verbatim transcript of Richard Titherington’s interview on CNBC-TV18

Q: How have you read all the developments that have taken place in the US especially with regards to the shutdown?

A: US markets are clearly concerned about the government shutdown and the standoff between the Democrats and the Republicans. I think the underlying economic picture continues to improve which is encouraging.

Q: Would there be any interest in emerging markets (EM) to hedge positions on the rising uncertainty in the US, especially because of the debt ceiling deadline which is coming closer?

A: You have seen a short-term reaction in EMs to the debt ceiling debate, but a far bigger issue is the whole question of quantitative easing (QE) and tapering and you could see earlier in the year that had a pretty dramatic impact on EMs. So, I am more focused on the tapering question than I am in terms of the debt ceiling.

Q: Will we see the same volatility once the Fed actually decides to taper?

A: The issue around when and how much the Fed decides to taper is very important. Clearly, markets were very nervous about that before. I think the Fed has tried to prepare the ground and manage expectations, but we should expect a market reaction as and when tapering finally occurs.