Asia credit policy, not Fed, to be roadmap: Morgan Stanley

Keeping rates unchanged at 0-0.25% and the discount rate at 0.75%, the Federal Reserve late last night announced that it would launch a new USD 400 billion programme in a move to rebalance its USD 2.87 trillion portfolio. The move sent the markets in the US to near session lows.

However, Jonathan Garner, managing director and head of global emerging market strategy at Morgan Stanley Research said this won't alter their approach towards emerging markets. "We have never followed a Fed- or US-centric approach when it comes to parking funds in Asian markets. We are focused on what Asian markets are doing on the monetary side far more than the Fed's move," he told CNBC-TV18 in an exclusive interview. Also Read: Nifty may reach 5200 with strong support at 5000 says Edelweiss Brazil, Russia and Turkey have already adjusted monetary policy. He is also looking forward to what happens on the monetary policy front in China-"that will be a far more important moment for our markets than what the Fed did yesterday," he said. But, how does the road ahead look like? According to Peter Hooper chief economist for Deutsche Bank Securities, markets globally will continue to falter if there is no resolution in the US and Europe. Moreover, the chances of US going into a mild recession also increase. "If that happens, a third round of quantitative easing is very much on the table, but not until early next year. By then you will have a Fed resolution one way or the other of the US fiscal situation. The picture is not yet bleak enough for them to have taken that step. But it is certainly waiting in the wings," he told CNBC-TV18. Below is the edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the accompanying video. Q: What should emerging markets takeaway from the Fed's statement yesterday? What do you expect to see here in the October December quarter? A: At Morgan Stanley we have never been big believers in a sort of Fed centric or US centric approach to investing in Asian emerging markets (EMs). Certainly, in 2008 a high degree of self-help policy easing on both the monetary and fiscal side caused our markets to turn around. That was the first time that our markets led to a global economic recovery. We are focused on what Asian EMs doing on the monetary side far more than the Fed