John Woods, MD & Chief Investment Strategist, APAC, Citi Private Bank recommends any selloff as an opportunity to hedge. According to him, one must take take advantage of market uncertainties. “These are great opportunities for clients to essentially protect their portfolios with cheaper hedging strategies,” he adds.
In an interview to CNBC-TV18's Latha Venkatesh and Sonia Shenoy, Woods says the beating experienced by the global markets on the back of weak China PMI data and US PMI data is not a fundamental worry overnight but a correction in the already overbought market. He is bullish on the US growth and US equity markets.
Woods believes the Indian index may correct if the intervention in Turkey and the devaluation in Argentina manifests.
Below is the verbatim transcript of John Woods’ interview on CNBC-TV18
Sonia: How did you read into the negative data out of China? What kind of concomitant impact could it have on a market like India now?
A: There have been a confluence of negative events in prints - the China PMI, the US PMI, the intervention in Turkey, the devaluation in Argentina; these risk-off events were taken negatively by the market, but the overwhelming point here is that the market was overbought. If you look at the relative strength index (RSI), since early January, it has been diverging with market action and this seems to be an opportunity to sell.
There is nothing fundamentally worrying in the data overnight. If you look at the PMI prints in Europe, they actually surprised to the upside. This was an opportunity to correct overbought conditions. The Dow has been flirting with 16500 now pretty much for the whole month and I just noticed that from an RSI perspective it has been diverging and we are now sitting quite comfortably on the 50-day moving average. So, this is more of a technical event than anything worrying from a fundamentals perspective.
Latha: How much of a selloff do you expect in the US markets? Which asset classes do you see selling and how much?
A: What we are advising to our clients is to use any selloff as an opportunity to hedge. We think that volatilities are still cheap at current levels and should be taken advantage of as any market uncertainty emerges. So, these are great opportunities for clients to essentially protect their portfolios with cheaper hedging strategies.
Do I expect this is a meaningful risk-off event and correction - not really. We actually have a positive view towards US growth. We have a positive view towards US equity markets and it is just inevitable given these heavily overbought market conditions that a little correction was likely.
Sonia: What is your view on the Indian market?
A: I am a little concerned about market action in Turkey and Argentina. It is possible that we may get a modest bounce in risk aversion in emerging markets and if contagion from Turkey and Argentina migrates to Asia, those markets that are trading at their highs and have shown no real indication of wanting to correct, may be vulnerable. This is the case with India with the way I am looking at the Nifty pretty much at close to all-time highs. So it would not at all surprise me if we saw some modest correction in the index if this contagion from Turkey and Argentina manifests.
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