Gabriel Wallach, fund manager at Fortis Investments, believes that emerging markets (EMs) will witness profit booking in the coming weeks. EMs have gained 15% post correction; and there are less concerns in EMs about interest rates and inflation, he says.
Wallach further says that lot of negatives on global growth still persists and he expects markets to be cautious going forward. He also says that one must watch out for global cues from US data, which may signal a growth slowdown.
Excerpts from CNBC-TV18's exclusive interview with Gabriel Wallach:
Not a great day for global markets, what do you think are the key concerns and are we ready to get pegged back once again?
In terms of the markets coming back, we have had quite a significant rally, particularly in the emerging markets if not developed markets. Of the last two and a half weeks from the lows of June 13, we have seen quite a significant rally in emerging markets, up from 15% on an average.
Certainly there are less concerns in the market about higher interest rates as well as concerns about inflation and growth. Although I would caution that having seen this recovery and multiples come back to relatively high levels, one could see a bit of a pullback or profit taking.
How have you read this pullback though? Is this just a temporary correction or do you think that the market has put most of the worst news behind it?
No,I think that there are a lot of negatives still out there, concerns about the global growth being the most significant and therefore the markets have reacted so positively to the recent Fed action. The market is facing incidentally no major increases in interest rates coming up because global growth indicators have already rolled over in many cases and the concern going forward will be much more focussed on earnings growth and the economic growth.
Ido think that the first part of this correction was well over done, very severe much more related to an adjustment in valuations as well as concerns about current account deficits in certain markets like Turkey, Hungary and South Africa, for example.
Butgoing forward, I think that the markets will be very cautious and very nervous about global growth indicators and data coming out of, particularly, the US, where there is some concern about the slowdown journey in the consumer.
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