With the sharp correction in the global equities, where should investors be putting their money and how much more of a downfall can we see? Is the worst over last week or are we going to see more reverses this week? In an interview to CNBC-TV18, Seth Freeman, CEO & CIO of EM Capital Management shared his views and opinions on on global turmoil.
Below is the transcript of Seth Freeman's interview with Latha Venkatesh and Nigel D'Souza on CNBC-TV18.
Nigel: You have seen the mother market correct, 500 points in a single trading session, it is down close to around 10 percent from the recent peak, do you expect more pain coming in from the US markets?
A: It is possible we are going to see this kind of volatility through the week -- first week of September. The fact is I believe a lot of what we saw this last week hardly represents the fact that volumes are much lower than usual and hence it is towards price movements, one direction or the other. I believe once we have traders and portfolio managers all back to work after Labour Day here in the US, I expect it to become a much more normalised.
Latha: This week we are getting a lot of US economic data, you will get the purchasing managers index (PMI), you will get the pending home sales data, durable goods orders and finally you get Q2 gross domestic product (GDP) number as well, which is expected to come in at 3.2 percent for Q2, what are your own expectations? Will these data likely pull up global equities and primarily US equities?
A: I don't think so and it has to do much more with earnings right now and we still have some fundamental problems with our employment situation here, which is one of the reasons you are not seeing inflation and the reason we are not seeing inflation is not only because of oil prices, it is because increase or not getting raises or people who have taken charge recently are taking charge either part time or lower rates and this is actually constraining consumer spending and that is the majority of our economy here.
Nigel: We have seen a lot of developments particularly in the last month or so, now when are you expecting the Fed to go ahead and hike rates because we have seen the bond yields there to move towards 2 percent, we have seen some weakness in the dollar as well, are you factoring in a September rate hike or do you think in fact that has been pushed forward because of the recent volatility that we have seen?
A: I am thinking of December, end of the year. If there is an adjustment, it might be very small and other than psychological impact, it is possible they will do something just for purposes of telling the market that they are going to begin making adjustments but I think that the greatest concern for all of us is the reports coming out of China.
Latha: So your point is that if we got good US data, it won't be enough to put a bottom to global equity markets, the markets will still looking at Chinese data?
A: Yes, I think the Chinese data is much more disconcerting at the moment and one of the toughest problems about Chinese data is that in any way there is not a whole lot of confidence in it. So it makes it much harder to analyse.
Latha: So in this current fall, are you a buyer, are you a seller or are you standing pat?
A: We are certainly working at. I think that this might be a time to buy into the shares, buy into the companies that people like to the extent that they are going down now, they can buy at a little bit better price than just ten days. So this is certainly not the time to get out. I don’t believe and I just don’t think that this is a permanent situation. Now I would say our market is not a sentiment driven as Indian but I think the situation with Twitter being down 50 percent and below its initial public offering (IPO) price and put pressure on some of these other internet based companies, I think that could affect the Nasdaq and just make people nervous.
For full interview, watch accompanying video..
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