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Last Updated : Nov 16, 2016 06:19 PM IST | Source: CNBC-TV18

US Fed move won't hit interest rates of Asian markets: Ecognosis

Refuting such predictions, Andrew Freris, CEO of Ecognosis Advisory opines that that small Asian markets are massively outperforming developed markets.

The strengthening in US bond yields and dollar after Donald Trump became United States' President-elect has led experts to speculate that the developed nations might outperform emerging markets.

Refuting such predictions, Andrew Freris, CEO of Ecognosis Advisory opines that that small Asian markets are massively outperforming developed markets.

In an interview with CNBC-TV18 he said that going forward the US Fed decision will hardly have any impact on the interest rates of Asian markets.


With respect to emerging markets, Freris has a positive outlook on Brazil, Russia, Thailand, Indonesia and Taiwan.

Below is the verbatim transcript of Andrew Freris' interview to Latha Venkatesh & Anuj Singhal on CNBC-TV18.

Anuj: We have seen a huge rally in US market. We have seen big rally in dollar, we have seen the bond yields in US move up. Do you expect that to continue and do you think developed markets like US will now outperform the emerging markets?

A: Not in the absolute slightest. I do not know where people are seeing it. Clearly, we are not looking exactly the same numbers.

There is a series of small Asian markets that are massively outperforming everybody else. The S&P is 6 percent year-to-date. The Nikkei in US dollar terms is 3.5 percent up-to-date and it is minus 6 percent down in Indian terms - big performance. And eventually every single euro index is down in US dollar terms. So let us not talk about huge moves in the market now.

However, if you want to see good performance; look at Thai index. I know it is a very small index, 16 percent year-to-date in dollar terms. Jakarta index - 14 percent year-to-date in US dollar terms. The Taiwanese index - 11.5 percent in US dollar terms year-to-date. You are not going to base your portfolio on those three markets but everything together it is plainly, factually long. Remember, I am not giving you opinion. I am giving you facts.

Latha: How would you expect this rise in the dollar index and bond yields to play out on emerging markets. What would be your pecking order for the next 6-12 months?

A: I will split it up in two parts. Can we forget the impact of US American interest rates on local interest rates, there isn't any?

Let us take India. In the last two years what has the Reserve Bank of India being doing. It has been cutting interest rates. What the Fed has been doing. Posturing to increase interest rates and maybe likely they will increase now and a rate increase in December. India is only just one example

American US dollar interest rates and local Asian interest rates are completely decoupled for decades now; I do not know why people talk about, except for Hong Kong. However, if I am look at US dollar denominated Asian bonds, it is all together different.

So what the Fed does, will have zero impact on local Asian interest rates.

Latha: What are you top equity markets in the emerging market basket?

A: I like three Asians that I have indicated and surprisingly enough actually I rather like the Brazilian stock market. However, Brazil ridden by corruption, by political instability, it is 58 percent up year-to-date US dollar terms. The Russian market is between 15 percent and 20 percent up in US dollar terms. So if I was to take an emerging market basket. I would definitely have Russia Brazil, Thailand, Jakarta and Taiwan in my basket.

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First Published on Nov 16, 2016 09:09 am
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