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Blame Russia for crisis, India in good spot: Credit Suisse

Fan Cheukwan, Chief Investment Officer, Private Banking & Wealth Management, APAC of Credit Suisse spoke about deep cut in emerging markets and the possibility of central bank interventions to arrest the slide.

She remains positive on India in FY16 on the back of the growth supportive reform measures and the latest relaxation of the Central Bank (RBI) for refinancing of existing project loans.

Below is the transcript of Fan Cheukwan’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Sonia: Things are looking very difficult across global markets. What is your assessment of how the Asian market set up will look like in 2015?

A: I think the current market turbulence triggered by the currency crisis in Russia. It is going to weigh on risk sentiment going into yen. So we need to wait for signs of stabilisation in the currency market. Most likely we will see further central bank intervention and potential capital control to be implemented in order to stabilise the markets. But in the near-term, risk sentiment towards the emerging market — particularly that market in the oil exporting EM — would remain vulnerable.

Latha: What is your sense about what the Fed might do later today? Iif they were to sound more dovish than the market was expecting, will that be some kind of a straw to hang on to, will that stabilise markets at all?

A: I think the market has largely factored in the possibility that the Fed is going to remove the phrase of `considerable time’ and to substitute `guidance’ with some statement that give the Central Bank leeway on the exact timing of rate hike. So I don’t think the FOMC will provide a clear timetable on the first rate hike. It will reiterate the policy span but the timing for interest rate normalisation would be data dependent. But it still remains likely that the phrase of `considerable time’ would be removed in the statement. I think that the market will carefully monitor the wording of the FOMC guidance in response to the current EM turmoil.

Sonia: Would you buy any of the Asian markets now and if yes, which ones?

A: I do see investment opportunities in selected Asian markets given that Asia is a net beneficiary of lower oil and commodity prices as compared with other major emerging market regions, which depends on commodity export. I particularly like the Asian markets, which will benefit from policy easing such as China. We like beneficiary of stronger US growth such as Japan and Taiwan. India looks increasingly interesting given the sharp corrections and infact India is a major beneficiary of lower oil price as reflected by the latest November wholesale price index (WPI) numbers, which surprised to the downside again for the sixth consecutive month to zero. So these would raise the probability of an earlier RBI rate cut to support economic growth. These would also add a policy driver to the Indian equity market. We are also positive on the cyclical growth recovery of India in 2015 on the back of the growth supportive reform measures and the latest relaxation of the Central Bank (RBI) for refinancing of existing project loans.

Latha: How would you look at Indian government debt? We have received an avalanche of money over USD 20 billion this year into Indian debt markets? Just in the last two days, there has been selling, are you going to see that continuing?

A: I think there would be some near-term volatility in the Indian bond market. But the prospect of further monetary policy easing and improved inflation outlook would bode well for the medium-term investment outlook of the Indian bond markets despite a short-term volatility in the market that is also related to the weakness in the currency.

Sonia: Would you buy any of the Asian markets now and if yes, which ones?

A: I do see investment opportunities in selected Asian markets given that Asia is a net beneficiary of lower oil and commodity prices as compared with other major emerging market regions, which depends on commodity export. I particularly like the Asian markets, which will benefit from policy easing such as China. We like beneficiary of stronger US growth such as Japan and Taiwan. India looks increasingly interesting given the sharp corrections and infact India is a major beneficiary of lower oil price as reflected by the latest November wholesale price index (WPI) numbers, which surprised to the downside again for the sixth consecutive month to zero. So these would raise the probability of an earlier RBI rate cut to support economic growth so these would also add a policy driver to the Indian equity market and we are also positive on the cyclical growth recovery of India both in 2015 on the back of the growth supportive reform measures and we also just have the latest relaxation of the Central Bank for refinancing of existing project loans.

Latha: You don’t see the sell-off across emerging markets stopping anytime soon, will it have to wait for stability in Russia?

A: I think we need to wait for some stabilisation in the currency market in the coming weeks but the fundamental factor still remain constructive especially for markets, which will benefit from lower oil and commodity prices.

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