The global markets have been selling-off since past two days with the US stocks closing at one-month low and Asia and Europe trading weak. Speaking to CNBC-TV18, Geoffrey Dennis, head- Global Emerging Market Strategy, UBS said there is fair amount of panic among global investors
According to him, there will be a buying opportunity in emerging markets as currently, valuations are not expensive. He does not expect a long-term correction in the markets.
Dennis is overweight on China and India and will buy the two once the dollar settles. He believes rupee has been a relative outperformer versus the dollar and says the Indian market is finding excuses for profit booking post the Union Budget and is unlikely to underperform for too long.
Below is verbatim transcript of the interview:
Q: We have seen big fall in the US markets overnight, we have seen the dollar index surge to 100. Do you see a bit of panic in global markets right now?
A: There is certainly a fair amount of panic in global markets. It is all primarily tied to the sudden rally in the dollar and that is giving you a flight to quality in terms of market. The very strong employment reports out of the US on Friday has raised expectations about when Fed will raise interest rates. So, there is certainly a bit of mini panic going on; no question.
Q: Should you use this panic as an opportunity to buy into global equities? If yes, what would your top emerging market preferences be for a buy now?
A: There will be a buying opportunity out of all of this. However, you have to wait for the dollar to settle down. The dollar has had a very big move against the major currencies and particularly against the euro recently and you need to see the dollar settle down before you move into buy.
However, we certainly think this will be a good long-term buying opportunity. Our own preferences, to be overweight in Asia; our favourite markets in Asia are China and India and we have some selective exposure in Latin America.
However, while this turbulence is going on, investors will want to stay on the sidelines until they see markets settle down particularly the currency settle down and then it will be a buying opportunity because global growth is fair and therefore markets have sold off too much.
Q: This month China started to outperform India quite a bit, I think it is on a relative basis outperforming India by 5 percent. Do you think it is a bit of an aberration, will the India market again catch up or do you see a bit of near-term outperformance for China?
A: I don't think it is particularly an aberration because the Chinese market has been doing quite a lot for a while now although last year there was particular excitement in China with the Asia market which now we are looking at. We have to look at the typically Hong Kong shares in China.
I think India is paused clearly because of some profit taking. Perhaps if there is some if not disappointment, there was some excuse for profit taking after the recent Budget.
However, we are very bullish about the Indian story because of corporate earnings growth, because of good performance by corporates generally because of the reform story, because of the growth the overall economy and so this is only a pause in India's strong performance.
I would worry to pick between the two of them. I think they are both going to do well but certainly I do not expect India to be an underperformer for long. I think it is going to continue to move higher over the medium-term.
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