The Brussels attacks have disturbed the markets, says Ian Hui, Global Market Strategist at JPMorgan Asset Management in an interview to CNBC-TV18. However, he is hopeful of markets recovering soon. The Belgium index ended in the green despite the attacks. This, he feels, owes a great deal to some good news over the last few days. Supportive measures from central banks, dovish reaction from the Fed meet and weakening USD have calmed worries in emerging markets (EM), he says, adding, there could be profit-booking in the aftermath of the attacks.He believes equities will be stronger than fixed income (investments) within developed markets which will help them pull ahead of EMs. Regarding India's position in the emerging pack, he says the country still lags Brazil on the valuation side. Below is the verbatim transcript of Ian Hui's interview with Latha Venkatesh & Reema Tendulkar on CNBC-TV18.
Reema: Going by the stock price reaction and the way the indices recovered from the lows, it looks like the impact of the Brussels' terror attack was fairly limited. Is that how we should read it or do you expect a lingering impact to take place over the next few days?
A: We have seen a market rise over the last few days. Geopolitical risks as we have seen yesterday with Brussels, seems to slightly disturb the market today, quiet mixed. Of course my sympathies and condolence to what happened to the people in Brussels.
I cannot comment too much on the political implications of that but usually as long as there haven't been such attacks like after the initial one, I think the market should still recover but it definitely cause some worries.
Latha: Does it look like the market has so much of robustness or risk is so robust that it doesn't even care for this news. As my colleague was pointing out that even Brussels index, the Belgian index ended in the green yesterday. Is the market in such a bullish mood that it is making good news out of bad news?
A: I do not think we are quite in a position that making good news out of bad news. Previously before, in the last few days there has been quite a bit of good news in the market that have supported what has been happening. We have seen some supportive measures from central banks; the sort of dovish initial reaction from the Fed meeting a few weeks ago was also supportive. We have seen the US dollar weaken - that should have calm down a lot of the worries in emerging markets. We did also see commodity markets and oil over the last few days except for the most recent days, also recovery. There might be a bit more good news for the commodity markets there. So, I do think in general that most of the news was positive. It is fairly a mix day with the market reaction that I can see at the moment maybe some profit taking, maybe some more noise on geopolitics but still generally positive overall.
Reema: Since the start of the month the best trades have been buying the Brazilian or the Russian index, commodity linked indices which have rallied about 15-20 percent and then it is followed by India which is up more than 10 percent in March and it has outperformed the rest of the Asian markets or even the developed markets. Is that a trade which you believe will continue to make money even going ahead?
A: We are still seeing or advising a more balanced approach to the allocation. We still probably see prefer equities slightly over fixed income at the moment. However, developed markets versus emerging markets; we still think the developed markets are going to pull ahead, they still in a more comfortable position against the emerging markets. And within the emerging markets, as you mentioned before Brazil and couple of the other commodity markets, on the valuation side it does seem a lot more positives for them against India. India, I think is slightly below its 10-year average on the valuation side. We still do see some positives in India but the valuation story for a lot of other emerging countries does seem a bit better at the moment.
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