See lower probability of QE3: Mark Konyn

The US macro data has been mixed. The non-farm payrolls completely disappointed the street. Mark Konyn, chief executive officer of CCAM sees lower probability of a quantitative easing 3 (QE3).

According to him, QE has not had a significant impact to stimulate growth. "There isn't really any clear evidence that it's helping growth, it's creating jobs or indeed it's even good for the private sector. What it has done is made it easier for government to borrow money, made it easier for corporates to borrow money, but that money is not circulating into the real economy," he elaborates. Also read: Earnings, policy action key factors for India, says PIMCO Below is the edited transcript of his interview on CNBC-TV18. Also watch the accompanying video. Q: How are you reading the events out of Greece, Germany and France? What we heard, until Friday, was that Hollande's election was pretty much known and therefore may be most of that uncertainty is already in the price. That doesn’t seem to be the case. A: I don't think that was the case. I think there was a realisation that a reality could occur, but now the woe has gone that way. The reality is starting to sink in. It raises all sorts of questions about the relationship clearly with Angela Merkel in Germany and to what extent the austerity pack is going to remain in place. It raises a number of questions for elsewhere in Europe because France, second largest economy, has been supporter of the measures that have been implemented so far, the bailouts have been contingent on certain economic polices being put in place. If France itself starts to move away from believing that those economic policies are valid, it's going to be very difficult to impose those conditions on a smaller nation. So, it raises a number of questions. That’s what investors are seeing today. They are little bit nervous, they are unsure about how this is going to play out. As a result, we are seeing markets pullback. Q: What exactly could we see differently in terms of policy, in terms of changes with regards to austerity measures with the new government vis-à-vis the old government? What could we see as a mark change in Europe going forward? A: Certainly, in terms of France, the president elect Hollande has clearly been elected on a platform of reversing existing policy of austerity and trying to put in place so called growth pact. No one really has any details on this and on how that might shape up. But the objectives are pretty clear, to try and focus a little bit more on the average person, to improve working conditions in France where we have got unemployment over 10%, to get that unemployment rate down and to try and reverse this overall trend of trying to shrink the deficit by reducing spending. Socialist come back into power in terms of getting that president in place for the first time in many years, nearly two decades and it's on that platform. But the details are unknown yet. What's likely is that we will definitely see some compromise because once the honeymoon is over; this situation is still far from being a simple choice between austerity and growth. There are a number of aspects to it that would need a lot of corporation with neighbours, particularly Germany. The results of domestic policy will need to be traded against regional consideration. So, no definite outcome yet, but what investors are seeing is that uncertainty immediately. _PAGEBREAK_ Q: What are you expecting on the euro/dollar itself? We have seen it plunge below 1.30 at long last. Are there a lot of losses to come? A: Beyond France, we have also got the votes in Greece as well where our main partner in the current coalition has lost considerably in terms of its ranking in the poll. Although all the votes have not been counted, the likelihood is we are going to have to see a rework of that coalition with some of the fringe parties, perhaps having more say in the overall outcome and therefore influence on policy. So, again it raises all those questions about the integrity of the Euro zone, to what extent some of these smaller nations can live up to their commitments in terms of reining in their budgetary spending and trying to get the economy in better shape to comply with broader rules and conditions in order to be bailed out. Although Greek is not a major economy within the Euro zone, symbolically it's very significant in terms of the integrity of the euro. So, overall this is going to weigh heavy short-term on the euro. It explains why we are seeing weakness in the short-term. It is also compounded by events in France which suggests that perhaps some of the agreements that are existing and in place between two biggest economies perhaps will be renegotiated. That’s weighing on the euro overall. It’s likely to continue for a little longer. Although I suspect as we move beyond this period of uncertainty, the euro will find its feet again and recover some of the losses that we have seen in the most recent trading periods. Q: How exactly does the US market fit into this entire scheme of things? We had that mixed macro data which came out from the US and then the non-farm payrolls which completely disappointed the street. Is there a high probability now that there could be a QE3 which could then pump money into markets and especially something like emerging markets (EMs) in India? A: You are absolutely right. If there were a QE3, that would be the starting point to again flows to come through to riskier assets. That would be good news for EMs. Probably with the exception of China in recent weeks, we have seen EMs sell off from their highs as money has been withdrawn. India has been part of that global set of conditions. But I suspect where we are at the moment in terms of attitude towards QE. The academic argument and indeed the real politic argument is starting to move against QE. It’s done its job in providing some confidence overall to the financial system, but it hasn't really had a significant impact on the real economies where it’s been applied whether that was in Japan previously or the US most recently or Europe through its own programme and the UK indeed. There isn’t really any clear evidence that it’s helping growth, it’s creating jobs or indeed it’s even good for the private sector. What it has done is made it easier for government to borrow money, made it easier for corporates to borrow money, but that money is not circulating into the real economy. So, I suspect from the basis of that and judging the current mood and attitude towards QE, I would say it's a lower order of probability that we are moving towards more QE.