Mkts still attractive for long-term FIIs: BNP Paribas

Mkts still attractive for long-term FIIs: BNP Paribas
2007-10-04 17:12:45 Source : Moneycontrol.com

Chin Loo, Currency Strategist of BNP Paribas said, the underlying sentiment was still quite bullish. She said the reverberation in the markets was more because of backup positions ahead of non-farm payrolls on Friday.

Speaking on volatility, she said it was symptomatic of markets having a split opinion. She added, “There is a fair amount of bulls as well as bears in the markets and interplay of these two leads to intraday volatility.”

She said the year-end target for the rupee was 38.50 and there was still some more downside left.

Excerpts from CNBC-TV18's exclusive interview with Chin Loo:

Q: What’s the call on what is happening in the Hang Seng and the reverberation that we have had domestically?

A: Well it is still quite selective. The Hang Seng was quite bullish but now it’s under some pressure from profit taking, but underlying sentiment is very bullish. I think I will subscribe this more to scaling backup positions ahead of the non-farm payrolls tomorrow.

Q: How are you reading into the kind of volatility that we are seeing in Hang Seng particularly?

A: Volatility is a result of huge inflows that is coming in and therefore as an exit; there is some chipping off the table. You can expect the decline to be fairly quick as well. I think it’s symptomatic of markets having a split opinion at this stage. There is a fair amount of bulls as well as bears in the markets and interplay of these two leads to intraday volatility.

Q: How are you viewing India amidst this volatility?

A: We remain very positive on India as well as the Indian rupee. We have had calls for some time on the dollar-rupee falling below 40. So, this comes as no surprise to us. What is quite interesting is that the trend in the rupee in the very short-term has been quite separate from the dollar-Asian trends. I think it shows that Indian rupee is marching to its own drumbeat and the appreciation path in the rupee is very much dependent on intraday liquidity and how the RBI managed it.

Q: How much more appreciation do you see in the rupee because we are already at 39.50 right now?

A: Our year-end target is 38.50; I think there is more downside. What is interesting to watch obviously is other risks brewing in the US economy and for the US dollar. And as we head into the G-8 meeting, that should be a non-event because the G-7 leaders had warned for some time about global imbalances and the need for the US dollar to weaken. So, that should not come as a surprise therefore.

Q: A fair amount of liquidity has come our way this week, aside of the deep cut that we saw yesterday and today, the profit booking that we have seen. Would you say that equity markets were looking expensive?

A: I wouldn’t want to comment on equity markets, but in terms of the flows that we are seeing, certainly a lot of flows are still quite positively geared towards Asia because we feel that is a high growth story, and that in terms of drivers behind the growth remains very much intact even into next year.

So, the opportunities that present themselves are still very attractive to long-term foreign investors and that is one of the key drivers for the shift in the Indian rupee sentiment.

Q: How are you viewing the FII appetite across the region at this point in time?

A: It is good. I think the survey is that people have been very much positive across mostly all quarters coming from interest rates, credits as well as equities; most investors do have a positive reading for Asia next year. So if markets do trade the way that people think, then I think there are more advantages to be had for Asia as well as the rupee.