Positive on US, european equities: Societe Generale

Speaking to CNBC-TV18, Patrick Legland, Societe Generale said the group remains positive on US equities because they believe that Fed's tone has not changed and so long as unemployment rate in the US will not be below 6.5 or 6 percent, they will remain relatively accommodative.

He added European equities remain their best asset class. "Within European equities we are particularly positive on peripherals where we find some very good assets in some sectors like financials, construction and cyclical trading below book value," he stated. Commenting on emerging markets, he added that global investors were getting conflicting messages from there because on one hand some markets like India and South-East Aisa have appealing valuations but on other hand there are poor figures coming out of market like China. On the currency front, Legland said they are positive on emerging market currencices since most of them have corrected and are expected to rebound. They expect the US dollar to strenghten and euro to weaken and have a forecast of 1.20 on the euro-dollar by the year-end. Also read: Rupee may touch 60/$ by year end; CAD worrisome: JP Morgan Below is the verbatim transcript of his interview on CNBC-TV18 Q: What is the key cue that the European markets will be watching out for today and what is the expectation from the Purchasing Managers' Index (PMI)? How big will it be in terms of a movement for the European markets? A: We are likely to have some disappointment during the week. Firstly, the PMI will not show any improvement in European economy. Two, at the European Central Bank (ECB) meeting there is clearly very little to expect, which means that European markets are very likely to go for disappointment during the week. We are likely to see further consolidation taking into account that we have had poor data coming from China and the rest of the world. This is likely to be used by investors as good buying opportunity as we do remain positive on European equity and risky assets. Q: For the slightly longer term, say for the quarter ahead how are you expecting developed market especially US equities to perform? Will they trend lower? Will they stop hitting this kind of two-five percent gains that they are scoring every month because of this fear of liquidity getting tighter or will they continue with their strong run because of the underlying economic fundamentals supposedly doing better? A: We are currently in a consolidation mood literally on all markets, particularly US, but we do remain positive on US equities. The tone of the Fed has not changed; they had said that so long as unemployment rate in the US will not be below 6.5 or 6 percent, they will remain relatively accommodative. But they are warning at the same time that at some point they will need to stop quantitative easing (QE). All this is market communication than anything else, but it will not change the positive stance that global investors have both on the US and Europe equities. Q: So, you expect the liquidity flows to remain strong. What would be your top three asset class preferences? A: Our best asset class is European equities, which remains the most interesting. Within European equities we are particularly positive on peripherals where we find some very good assets in some sectors like financials, construction, and cyclical trading below book value. We are also positive on consumers, which is a very interesting asset class as well. Q: How would you be placed on the currency space then? Where do you see the euro move from hereon considering that the yen has pulled back quite a bit from the lows that it was earlier trading at? A: We have a forecast of 1.20 for euro-dollar by year-end. We would expect US dollar to reinforce and euro to weaken. We are more positive on emerging market currencies, most of them have been correcting and would expect a rebound. These are our key calls for currencies. Q: We have seen an anemic performance in emerging markets and some countries have done worse. Within the emerging market space do you see money returning with a slightly greater ferocity than in the first half, as well, which would be your preferred markets? A: We have some conflicting message on emerging market. On the one side we start to see some very good values in emerging markets, South-East Asia, India as well, which is positive. On the other side, we continue to have poor figures coming from China. So, slowdown is only starting and this is very likely to put investors into doldrums about emerging markets despite interesting and appealing valuations.