Pressure on emerging markets may go on until June: EM Cap

It’s now more or less a given that Greece could find itself out of the euro zone. Even though there is a huge bout of panic selling seen across the global screen, Seth R Freeman of EM Capital Management says he doesn’t believe that a Greek exit from the euro zone will have such a large impact as envisaged by some analysts.

Emerging market equities will be hit for a while, maybe until next month. “Beyond Greece, it looks like the US recovery is also going to be a little slower than what the momentum made it look like, the other situation with oil being somewhat uncertain although it has been going down.” Below is an edited transcript of his interview to CNBC-TV18. Watch the accompanying video for more. Q: In the short-term, if Greece exits the Euro even though the elections are to be held in mid-June, what kind of an effect could we see on the global markets? How much lower could we go from here?
A: The problem in my mind is that the next election isn’t going to be until June. We are going to be seeing a lot of speculation and concerns for the next three-four weeks. I personally believe that it’s unlikely that the Greeks will reach a resolution internally. I also don’t believe the Greece leaving the Euro will be such a huge crisis as some experts believe. Q: What kind of an impact will it have on emerging markets because yesterday or for a couple of days now we have seen a bout of panic selling in markets, not just in markets like India but in markets like Hong Kong as well. Do you anticipate more pressure in emerging markets?
A: Yes I do and I think it will continue for at least the next month. There are some other reasons for that beyond Greece and one of them is that it looks like the US recovery is going to be a little slower than what the momentum made it look like, the other situation with oil being somewhat uncertain although it has been going down. So, investors continue to look for income or a little more safety than equities at the moment.