Like Chinese bonds, Indian stocks, says Ashmore's Jan Dehn

The panic seen in global markets on Monday was a bit overdone, feels Jan Dehn of Ashmore Investment. In an interview with CNBC-TV18, Dehn says the ongoing tumoil in China is a fall out of the reforms the government is trying to implement."I think it is very important to understand that the volatility in the market is ultimately a consequence of China trying to make very serious forward looking economic reforms and I think the markets are typically not very patient then we will want to see immediate results," says Dehn."Bonds in China and stocks in India, that would seem to me quite a decent trade," says Dehn. Below is the transcript of Jan Dehn's interview with Nigel D'Souza and Sumaira Abidi on CNBC-TV18.Sumaira: You think after what was being termed already as Black Monday worries have abated within 24 hours, markets have opened strong, is it that worries are over or is it just short covering that we are seeing this morning?A: No, I think there is definitely a sense that there was a bit of panic in the market, which was not perhaps fully justified by fundamentals. There has been a bit of an overreaction. There are quite serious important issues in the global markets that are still hurting the confidence with which the market is looking upon the future. For example, the big global trades such as US stocks and European government bonds, which have been the driving forces behind the market optimism of the last three-four years in developed economies -- these trade are not delivering at all. US stocks are down for the year, European government bonds have seen quite a serious losses in the past six months or so and this is rallying where most of the quantitative easing (QE) money has gone. So there is a sense that the markets are vulnerable because valuations are being pushed up to such high levels and it is difficult to see what is going to drive these markets and produce further returns going forward. So in a sense when a story like China begins to create volatility in the global markets, it doesn’t take a lot to create global nervousness and that is essentially what we have seen.Nigel: Do you believe that the China slowdown -- was it outplayed and is the India story intact because the last time you joined us, you told us that infact India story is very much intact?A: Yes and I still believe that. I don’t think anything has fundamentally changed in India at all. I think it is the same story as we talked about last time. It is a gradual investment-led recovery that is going to fuel a subsequent consumer-led recovery and I think that story is entirely intact. As for China, I think it is very important to understand that the volatility in the market is ultimately a consequence of China trying to make very serious forward looking economic reforms and I think the markets are typically not very patient then we will want to see immediate results but as I keep saying, if you want to make an omelette, you have to break some eggs and that is what the Chinese appear to be preparing to do.Sumaira: In that case, what is going to be your pecking order in terms of emerging market, would you look to buy the dips anywhere?A: I do believe that China's economy is going to slowdown as a consequence of the economic reforms and I think it is in a very strong position ultimately to manage this process given its reserves and its finances so I like bonds in China.As far as stocks are concerned, I like India and to the extent that we get a little bit of weakness coming through from the global volatility given that India's fundamental story remains very healthy, I wouldn’t mind putting some money into Indian stocks. So bonds in China and stocks in India, that would seem to me quite a decent trade.Nigel: Which stocks would you look to put your money in, you are betting on the India story, Larsen and Toubro (L&T) should be top of the list, you have seen fair bit of movement in terms of public sector undertaking (PSU) banking stocks as well, would you be looking at them?A: Yes, exactly. I think the financial story is going to play out with several phases first through the investment channel and ultimately to the consumer banking channel yes. So financials I quite like.