Spain aid-request by mid-Nov; EMEA is favourite: SocGen

Benoit Anne, MD, head-EM strategy, Societe Generale explains to CNBC-TV18 that expects Spain to request for aid at the next EU summit scheduled to be held in mid-November. Benoit Anne adds that the EMEA (Europe, Middle East and Africa) markets top his list markets to invest in.

Below is an edited transcript of the analysis on CNBC-TV18. Q: What do you expect from the EU summit? I read a report which quoted an EU Commission official commenting that there was not much to expect in terms of Greece and Spain during in the two-day meet. Do you concur?
A: Yes, I would agree with that. The core view at Societe Generale is that Spain will wait until after the local elections to formally go ahead with a request. There is also another summit coming up in mid-November and that’s our targeted date for Spain to ask for a formal bailout. So, this means nothing is to be expected from today’s European meet. The eurozone is moving in the right direction and that’s why global sentiment continues to be relatively firm. Q: If Spain does ask for a bailout in November, do you think the market will be a bit disappointed? How do you expect the markets to move in this period?
A: As long as the signals continue to be positive overall, I am not too concerned about the delay; it is a part of natural process and will take some time. What I want to see is continued positive signals from the EU and improvement of the macro data which will make my view on global emerging markets relatively comfortable as a whole. Q: By when do you expect a decision from the Troika on Greece and what do you expect from the decision? Do you think the IMF's statement recently have been positive? Do you think Greece should be able to get the next tranche without a hitch?
A: We will have to wait for the final report as that has been the official line and that's what the market should position towards. So it's still a bit of a waiting game on that front. But if I had to prioritise the significance of issues, Spain is much more market-relevant than Greece. Q: We have had a decent rally across emerging markets. On Wednesday, when a lot of the global markets overnight had shown a decent move India failed to participate. What are your thought on this tactical move in the short-term? Do you think there is a tendency to book profits in the near-term or continue with a risk-on?
A: Risk-on and profit taking not necessarily incompatible. I would say it is a natural process for investors to take profit once in a while. So it is not going to be a straight line but what matters to me is the absence of proper risk-aversion short. We tend to see profit taking seeping through on a regular basis.
To me, the way you interpret or take advantage of that is saying that those represent buying opportunities. There is a big difference between profit-taking and a risk-aversion short and I do not see any signs of a risk-aversion short at this point. So it still looks pretty good to me. Q: What are you buying at current levels and in which markets? Secondly, what is the kind of upside you expect and how soon would that materialise?
A: I would definitely go for markets in the EMEA (Europe, Middle East and Africa) because the ECB's signals have removed the contingent risk-factor on central Europe. So there is a lot of value there and I am bullish on those currencies and I think the growth scenario is improving as well. So EMEA is my favourite region of choice. Q: What is the kind of upside that you see in India?
A: In India, the dynamics are a bit more complicated. We have seen a strong recovery recently. But especially in terms of the currency, the momentum has been lost. I am a little more cautious at this point on India and await further clarification from the market.