India's strong domestic growth will see FII flows: Quam AMC
After global equity markets witnessed a volatile and tumultuous session, since the US credit rating downgrade, Chief Executive of Quam Asset Management, Richard Harris talks to CNBC-TV18 about how he reads the market post this newsflow. He also gives his outlook on certain commodities like Brent crude and gold.
Below is a verbatim transcript of his interview with CNBC-TV18’s Ekta Batra and Reema Tendulkar. For complete details watch the accompanying video.
Q: It is being said that the S&P downgrade of the US credit rating is more detrimental to European markets. What are your initial thoughts on what might happen?
A: I don’t know about it being detrimental to the European markets. Eventually, it has to be detrimental for the US but it’s still very early and quite difficult to say exactly what the full ramifications are. Some of the European markets look as if they are opening flat but remember on days like this, it’s just going to be quite volatile and everybody is probably hanging around for everybody else to see exactly what they are going to do.
We have been down well over 4% in Hong Kong today and we are now down over 3%. Our market’s gone down a substantial amount in that period of time. So maybe there is a bit of scope for recovery but there is lot of bad news still out there.
Q: So is there more downside in the medium-term and how much more would you peg it?
A: What is likely to happen is the market is going to keep looking for various bits of news. We don’t know what the ramifications of having an AA+, after all it’s supposed to be the risk free rate and now suddenly we have incorporated some risk into it in the States.
We don’t know what the whole situation about buying Italian debt is or even if they have the firepower to do it. At the moment, the market is just sitting there and maybe it’s frozen in the light, just wondering what to do. At the moment there are a lot of ‘don’t knows’ which is not a pretty good sign.
Q: How exactly do you think we are going to move with regards to the US opening this time around and how much of a downside do you possibly see on the S&P?
A: These bear markets don’t go down in a straight line, they do have upticks and up days as well and that’s quite a good thing. Yes, it’s possible - the markets may just still wait and see. That news from Moody’s doesn’t sound particularly good though. They are thinking about a further downgrade. If you think the probabilities are on more of a downside than an upside then maybe there is a chance the market still has more downside to go.
Q: In terms of the peripheral markets such as Spain, do you think that there is more of a risk there? How would you be placed on flows into India right now?
A: This is the interesting thing. If you are thinking philosophical, you might think - is this a sign of the transition from West to East. Markets with big domestic growing economies like India and China look quite interesting to me. I have been looking at Mongolia closely. Mongolia is very a much domestic market that’s growing.
These markets are likely to continue to grow even if there is a global equity crisis. If there is a global equity crisis, the tide is going to go out but that doesn’t mean that the sea is changing an awful lot. There is a strong possibility that some money may find a haven in markets which have strong domestic growth.
Q: What would you outlook then be on commodities like Brent crude and gold?
A: Gold is obviously always seen as a store of value so if we do see weak currencies and we may see weak currencies just as a reaction to the fact that we have had so much quantitative easing, then gold is likely to have some sort of underpinning. Of course, countries that are maybe looking at a default may want to sell some of their gold reserves.
On the oil side, if we are going to see slowing in the West then we will probably see slight easing in demand for oil. The oil prices go up and down but they are not making any more of it so it’s not a bad commodity to keep an eye on.
For gold prices in India, click here http://www.moneycontrol.com/commodity/
Get the latest gold prices here http://www.moneycontrol.com/commodity/
Q: There is a lot of fear that maybe France will be the next one to lose its AAA rating. Is the market already pricing that in?
A: Everyone seemed rather surprised over the weekend on the US AAA downgrade, so I don’t think it is. Each of these things is just not good. These are just a series of small pieces of bad news and that’s likely to weigh on markets, probably, for a number of months.
If you do look at the ratings which is AAA and which is AA+ etc, there are some surprising features. For instance, Spain is rated higher than Italy. Spain has much higher debt to GDP. The UK is still a AAA and some people think that that should be less and the US is now AA+, the same as Belgium. There maybe a little bit of inconsistency there but whatever happens, it’s fair to say there will definitely be some detrimental impact on ratings of countries after the weekend.
India will survive this downtrend: IDFC Asset Mgmt
Below is a verbatim transcript of his interview with CNBC-TV18’s Ekta Batra and Reema Tendulkar. For complete details watch the accompanying video.
Q: It is being said that the S&P downgrade of the US credit rating is more detrimental to European markets. What are your initial thoughts on what might happen?
A: I don’t know about it being detrimental to the European markets. Eventually, it has to be detrimental for the US but it’s still very early and quite difficult to say exactly what the full ramifications are. Some of the European markets look as if they are opening flat but remember on days like this, it’s just going to be quite volatile and everybody is probably hanging around for everybody else to see exactly what they are going to do.
We have been down well over 4% in Hong Kong today and we are now down over 3%. Our market’s gone down a substantial amount in that period of time. So maybe there is a bit of scope for recovery but there is lot of bad news still out there.
Q: So is there more downside in the medium-term and how much more would you peg it?
A: What is likely to happen is the market is going to keep looking for various bits of news. We don’t know what the ramifications of having an AA+, after all it’s supposed to be the risk free rate and now suddenly we have incorporated some risk into it in the States.
We don’t know what the whole situation about buying Italian debt is or even if they have the firepower to do it. At the moment, the market is just sitting there and maybe it’s frozen in the light, just wondering what to do. At the moment there are a lot of ‘don’t knows’ which is not a pretty good sign.
Q: How exactly do you think we are going to move with regards to the US opening this time around and how much of a downside do you possibly see on the S&P?
A: These bear markets don’t go down in a straight line, they do have upticks and up days as well and that’s quite a good thing. Yes, it’s possible - the markets may just still wait and see. That news from Moody’s doesn’t sound particularly good though. They are thinking about a further downgrade. If you think the probabilities are on more of a downside than an upside then maybe there is a chance the market still has more downside to go.
Q: In terms of the peripheral markets such as Spain, do you think that there is more of a risk there? How would you be placed on flows into India right now?
A: This is the interesting thing. If you are thinking philosophical, you might think - is this a sign of the transition from West to East. Markets with big domestic growing economies like India and China look quite interesting to me. I have been looking at Mongolia closely. Mongolia is very a much domestic market that’s growing.
These markets are likely to continue to grow even if there is a global equity crisis. If there is a global equity crisis, the tide is going to go out but that doesn’t mean that the sea is changing an awful lot. There is a strong possibility that some money may find a haven in markets which have strong domestic growth.
Q: What would you outlook then be on commodities like Brent crude and gold?
A: Gold is obviously always seen as a store of value so if we do see weak currencies and we may see weak currencies just as a reaction to the fact that we have had so much quantitative easing, then gold is likely to have some sort of underpinning. Of course, countries that are maybe looking at a default may want to sell some of their gold reserves.
On the oil side, if we are going to see slowing in the West then we will probably see slight easing in demand for oil. The oil prices go up and down but they are not making any more of it so it’s not a bad commodity to keep an eye on.
For gold prices in India, click here http://www.moneycontrol.com/commodity/
Get the latest gold prices here http://www.moneycontrol.com/commodity/
Q: There is a lot of fear that maybe France will be the next one to lose its AAA rating. Is the market already pricing that in?
A: Everyone seemed rather surprised over the weekend on the US AAA downgrade, so I don’t think it is. Each of these things is just not good. These are just a series of small pieces of bad news and that’s likely to weigh on markets, probably, for a number of months.
If you do look at the ratings which is AAA and which is AA+ etc, there are some surprising features. For instance, Spain is rated higher than Italy. Spain has much higher debt to GDP. The UK is still a AAA and some people think that that should be less and the US is now AA+, the same as Belgium. There maybe a little bit of inconsistency there but whatever happens, it’s fair to say there will definitely be some detrimental impact on ratings of countries after the weekend.
India will survive this downtrend: IDFC Asset Mgmt
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