Mkts close to near-term bottom, may bounce on ECB comment: AMP

The European Central Bank's (ECB) decision indicating injection of fresh stimulus into the eurozone by March may provide relief to volatile equity markets globally. And on the back of this, Shane Oliver, Head of Investment Strategy at AMP Capital Investors, expects a minor bounce back in the market. In an interview to CNBC-TV18, Oliver says markets may have already seen a near-term bottom. Key to all central bank's decisions will be the US recession, he says, adding, if that happens, markets have the potential to fall all the more. If alternatively, like myself, you do not see a US or global recession, then any falls from here will be pretty limited and it is a matter of looking for opportunities to benefit as markets recover through the remainder of the year," he adds.Below is the transcript of Shane Oliver’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Sonia: The bulls have been beaten black and blue in the last fortnight or so, but there are some hopes coming in from the European Central Bank (ECB) now. Do you think that will lift markets only in the very near-term or is there some hopes that bulls can put into place now?A: I think it is serially decided that we have seen the lows but markets have certainly head up for at least the short-term bounce because they have fallen a long way in a short space of time which means technically they are oversold. We are seeing very negative sentiment starting to appear, often again, a sign of markets making bottoms. And then of course, the Central Banks are going to be swinging into action. Last week saw a Fed President, James Bullard from St Louis in the US, standing a lot more dovish. This week we have got the ECB talking about potential further easing in March and I expect that next week we will see more dovish commentary from the Fed and the Bank of Japan (BoJ), possibly even an easing from the BoJ. So, I think all things will help markets. And we got to bear in mind that part of the reason for the recent turmoil has been the shift towards tightening by the US. If the Fed is starting to back away from that, then that will go a long way to helping share markets.Latha: What would your guess be, that we are very close to a near-term bottom? When do those signs emerge? And, if it is indeed a near-term bottom, what might smart money chase?A: I think we are close to a near-term bottom, we might have already seen it. But, if not, we are very close to it. Given the severity of the falls, most emerging countries’ share markets are already in bear markets. I think you have had falls greater than 20 percent, likewise, Japan and Europe have seen the same. US has seen a more moderate decline of about 13 percent. So, I think we are pretty close to the bottom if we have not already seen it and the key going forward for investors will be to monitor the quality of the rally that we see. If it is broad based, if it has strong momentum behind it and the economic fundamentals, globally, hold up, in other words, when you look business surveys, consumer confidence and that sorts of things, if those indicators hold up, then the rally will have legs. If those things are not mixed in, then we could still have another leg down.But, I think the key to all of this is that if you believe the US and world again, have a recession, then share markets have a lot more downside ahead of them, notwithstanding short-term bounces. If alternatively, like myself, you do not see a US or global recession, then any falls from here will be pretty limited and it is a matter of looking for opportunities to benefit as markets recover through the remainder of the year.Latha: That is for maybe a few months down. My question was actually more direct. We have seen a lot of foreign fund selling in India as well. Will they be buying back or will they at least stop selling?A: Typically, when markets in the US and Europe are falling, foreign investors tend to take their money back home and that obviously affects the Indian share market when that occurs. If we start seeing a little bit of a rally, a respond rally, markets moving higher, then some of that money will start to return. There is always a wariness about valuations compared to other emerging countries. Flipside though, is that India is one of few emerging countries that are in reasonably good shape. Lots of concern about Russia and Brazil of course, but at the other end, India is in reasonably good shape. And therefore, foreign investors will recover a fair degree of confidence in India. So, once confidence returns again, globally, those foreign investors flows will return.