Europe still remains big concern for investors: IG Markets

After last week's big rally, the global markets have been subdued this week. In an interview to CNBC-TV18, Jason Hughes, IG Markets says, Europe still remains a big concern to most investors globally.

He further says the Fed announced a very open-ended programme last week. "We might not really see the real benefit of this, until the beginning of 2013," he adds. Also read: India still riskier than peers despite reforms move, says expert Below is the edited transcript of his interview with CNBC-TV18's Reema Tendulkar and Ekta Batra. Q: Do you think that the rally is over? What’s the approach one should have towards the equities now? A: We certainly saw the big lift up; the QE feud party took place last week. We are seeing a bit more of a sober reality return to markets, particularly as we are seeing sort of PMI data come out across the board, slightly contractionary figures rather than anything close to expansionary. So, we are now saying that equity markets are going to probably factor this in, once we have got past the initial bounce in QE. I think, on the whole, we saw at the beginning of the year that after a strong start as jitters return to investors concerning Europe in particular, equities sold off quite heavily in the last month of quarter one. We could be lining up for something similar now. Q: Do you think that the best of QE3 is probably already priced in and the markets are now coming to terms with economic fundamentals or do you think this consolidation is just natural and we are going to see more of the risk-on rally continuing as actual bond purchases by the US Fed begins? A: The Fed announced a very open-ended programme last week. It gives a fair bit of range to actually implement things. We also know that there might be further policies that they can adopt down the line, if they feel that this isn’t stimulating the economy enough. They have given themselves a nice wide window. Europe still remains a big concern to most investors globally. There is still a fair bit to play out. We are going to continue to see sort of a poor or very disappointing growth numbers around the globe over the next six months or so, partly as QE starts to hopefully take a bit more of a positive effect. So, we might not really see the real benefit of this, until the beginning of 2013. Q: What's the cash call that investors are taking who are sitting on money right now? Are they looking to invest in the markets or perhaps even into emerging markets like India? A: As we come into the end of 2012, we are still seeing quite a number of investors on the sidelines. So, there are definitely people searching opportunities. But in terms of where they are really going to find, it is still anyone’s guess because there is a little bit too much uncertainty there. People are seemingly quite happy sitting on the sidelines even in the latest rally because they are very sceptical whether it will last. At the end of February, when we touched these high points before in 2012, a relatively drastic sell-off in the following month. That potentially could be what we are lining up for again. With that in mind, investors are relatively happy to remain on the sidelines or atleast try and play some of the volatility that we have seen in the coming days with very short-term strategies. _PAGEBREAK_ Q: Personally, how are you arranging the risk markets? Which would you prefer? A: I have been pretty positive on the emerging market front over 2012. I think that if you are looking at the two-year view or longer, they are probably getting very good valuations there. But you have to pick your markets. If you look at what's going on in India at the moment, with the uncertainty over the latest reforms and the disputes within the collation government, it doesn’t actually give investors a confidence to go and invest there. Whereas some of the other EMs such as Vietnam, Philippines and Thailand in South East Asia have seen relatively good amount of foreign investment remain there rather than coming back and forth. In terms of commodities, we are certainly seeing gold break out of its range that it held for most of August following QE3s announcement. Given the open ended nature of it, there is no real reason why we might not push on and perhaps test the USD 1,900 ounce levels that we saw in 2011.