Neutral on India; need weak euro, yen to drive growth: CIMB

Lee says the world needs weak euro and weak yen to drive global growth going ahead.

Below is the verbatim transcript of Shane Lee's interview with Anuj Singhal and Ekta Batra on CNBC-TV18.

Anuj: We have seen quite a bit of volatility in the US market and a first real sign of a correction - would you say that equities are in for a bit of rough time now?

A: I think so, yes. We have had a correction right about 8 percent since September. So initially the correction was led by the concerns about high US rates but since then we have seen broader concerns, geopolitical and also other concerns around US earnings - also European weakness as well is a contributing factors to the volatility and slowdown that we see in the US.

Ekta: Can you give us a sense in terms of further downside that we could see possibly in Brent crude prices as well as the further upside in gold prices? What is your sense on both?

A: Especially on oil, I think it is probably one of the markets that we look at that are showing some real signs of capitulation. So since about July, since the oil price fall about 25 percent, we don’t think that completely reflects demand practice. So if you look at all the indicators that we have seen for the US over that period they have all been pretty solid. So we don’t see demand dropping off much but we do think supply fundamentals are probably kicked in and that has been one of the reasons why we have seen such sharp fall in oil prices.

Anuj: What is the call on the market like India, which has seen a one-way rally from the start of the year but has started to consolidate or correct a bit now?

A: Yes, we have been fairly neutral on India for the time being. So in fact the markets actually held up reasonably well given the fall that we have seen in global markets but we are still waiting to see how things play out but our role is sort of reasonably positive on the markets.

Ekta: How worried should we be about the European markets and the downtick of 6 percent that we saw on the Athens Stock Exchange (ATHEX) as well as maybe even the 3 percent fall that we saw on the Brazilian markets from the Latin America?

A: Just on Europe, I think that is probably the key global concern at the moment. So I mentioned the US in that and things haven’t changed that much but Europe is one of the key concerns. So basically the way we are still looking at things at the moment is that it is three factors to see sustainable rally re-emerge otherwise we wouldn’t be a buyer of any rally that might emerge over the next month or so.

So the first one is higher bond yields, we think that 2.3 percent at the moment is too low relative to the fundamentals but there is a risk that is pricing in some near-term weakness in growth.

Second factor we think is the stronger US dollar. So we need to see that coming through.

Third point is the one that you just mentioned. Europe is one of the concerns and we would want to see stabilisation in the European growth outlook before we will be a buyer of any rally that might come through.

So in that context, particularly the strong US dollar, it is important to realise that we need a weak euro and we need a weaker yen to drive global growth going forward.