If currencies are rattled, India could be hit: Macquarie

UK leaving the European Union is like ‘blind leading blind’ situation with no visibility for investors, says Viktor Shvets of Macquarie. “Brexit is not the right answer for global economy or global investors, but for UK,” he says.Speaking to CNBC-TV18, Shvets says that Brexit is a systematic risk. Going forward, one can wait and see what steps policy makers and central banks take. Globally, central banks will have to coordinate with each other to control volatility from spiking up in the near-term. The main question is how pound will move in the next few months. Shvets believes that the pound is likely to appreciate. Emerging markets are reasonably well placed. However, if anything leads to a dislocation of currencies, it could derail EMs including India.Below is the verbatim transcript of Viktor Shvets' interview with Shereen Bhan on CNBC-TV18.Q: The screen looks completely different from what we had pictured yesterday or anticipated yesterday given the kind of opening that we have seen as far as European markets are concerned and also the anticipated US market opening, how would you read the kind of moves across equity as well as currency markets today on the back of the results that has finally come in, the UK deciding to exit out of the EU?A: What you essentially have is that is almost no visibility for private sector going forward. Therefore, investors have almost no visibility, they tend to congregate in very overcrowded trades and whenever there is a change in circumstances what you end up is those crowded trades get unwound very quickly. That is what happened last week, that is what happened this week. It is not any different than that.The question however going forward is Brexit a systemic risk, extent to which it systemic risk and what would policymakers particularly Central Banks do about it? The key concern is USD 250 trillion of debt on a global basis and whether the markets can handle global volatility?Q: The fear of a possible contagion now and what could happen for instance in Spain with the elections there and so on and so forth heading into obviously a global risk-off trade, so how do you anticipate at least over the next 12-24 hours, the kind of panic that we are seeing across the screen today, what you anticipate this playing up to at least in the immediate-term?A: In the immediate-term my view is that Central Bank will have to coordinate. There is no way out. Clearly, Federal Reserve tightening in July-September is dead, it is finished, quite possibly through the balance of the year and maybe forever maybe it is just one and done -- clearly what you also have to have is Bank of Japan (BoJ) have to become more active, clearly European Central Bank (ECB) and Bank of England (BoE) will have to become more proactive, clearly People's Bank of China (PBoC) will have to stop creeping devaluation of renminbi that they were doing. So what are those things that needs to occur in the next 24-48 hours is that you do need to have some kind of a global coordination. If you don’t have it then volatilities could spike seriously very similar to what happened if you remember in January. It might even go beyond that level. So I think it is inevitable, you have to have a coordination in next 44-48 hours.For entire discussion, watch accompanying video...