See further upside for global mkts post ECB move: StanChart

Mario Draghi's pledge to do whatever it takes to save the euro was backed up yesterday by the ECB's announcement of not setting any limit to the bond buying programme. Manpreet Gill of Standard Chartered said the global rally is likely to sustain if the investor is looking at a long time horizon. He believes the ECB move has mitigated the risk of contagion in peripheral European markets.

Moreover, Gill also sees further upside for global markets from current levels after the ECB announcement.
Also read: Mkt happy with ECB move; look out for downward move: Ross Here is the edited transcript of the interview on CNBC-TV18. Q: We have seen a substantial rally put in by all the global equity markets this day. Do you see this rally being durable and sustainable and how much more upside would you give it on the back of yesterday's move?
A: In our view if you are an investor with a reasonably long time horizon this rally should be reasonably durable. What the ECB action has done is to mitigate the risk of contagion in peripheral European markets. That was one sort of big risk hangover over markets globally and that has obviously been taken away.
That's good for risky assets including equity markets if you invest with a reasonably long time horizon. That may not necessarily hold of course in the very short-term where there is a lot of euphoria, but obviously still a fairly heavy sort of event calendar to work through over the next couple of months. Q: If Draghi has succeeded in removing the downside risk so to speak, the Europe implosion risk, then who gets the money that will be released from all the risk averse assets? What would be the order? Would it be US assets first, equity assets? Would it be Asian equity assets? Which of them?
A: One would expect the most immediate impact to be on European assets and that's one area where we had recently upgraded our view on European equities. We had an underweight view. We moved it up in neutral recently, because that’s where the concentration of risk has been largest.
It's really the worry of contagion spreading through the Southern Mediterranean European economies that was pressuring European assets. That's where you are seeing the biggest bounce and that's where at least in the immediate term, we would expect to see some of the biggest gains if this follows through smoothly. Q: When Draghi did the LTRO on December 15, after that we saw the rally for a good 60 days. We saw a fairly strong rally. Do you think something like that is on the cards now that he has removed an element of risk?
A: It's not directly comparable. Let's not forget that risky assets have been rallying for well over a month now and the turning point really came when Draghi went out and said that he will do whatever it takes to save the eurozone. That really was the turning point, not so much what happened yesterday.
So yes, this could definitely carry on. But, now what markets are likely to look for is evidence of exactly how this is done, how sterilization will happen because that's quite significant for markets and whether countries will go ahead and request the bailout funds and follow-through with the process smoothly. Q: Till we get more details about what you were referring to or even some skepticism about the conditionality, about the German Constitutional Court ruling, will more details on this keep the investors at bay or do you think what we got yesterday is sufficient for investors to start pumping in for the money right away?
A: What we got yesterday is definitely a huge step. It's very important and it's good for investors if you are taking a reasonably long time horizon. What we are more concerned about in the short-term is the event calendar which is quite heavy. Markets have already rallied quite a bit.
Let's not forget euro stocks is up well over 12% since Draghi went out and said that he will do whatever it takes. Measures of volatility like VIX suggest that markets are reasonably complacent. When you put those pictures together and you put together the short-term technical picture, it would suggest many asset classes are arguably a little bit overbought.
That suggests that markets are primed more sensitive to any negative news rather than being more sensitive to positive news, at least in the very short-term. But our view is that we would use any such weakness to buy if you have a time horizon that’s at least a few months long.