The Hindu Business Line : `Emerging markets boosted by ample liquidity'

Mr Dariusz Kowalczyk, Senior Investment Strategist at CFC Group believes that ample liquidity globally, creates demand for the emerging market equities. He adds that in China, the bubble is well supported by the fact that local investors have no other option to invest, except the stock market, as the real estate market has run out of steam.

Excerpts from CNBC-TV18's exclusive interview with Mr Kowalczyk

We have seen the Asian markets rally for the last couple of days. What are you attributing this strength to?

I think we should consider long term factors like ample liquidity, globally as well as the leadership from the US market, which touched record highs last week.

Ample liquidity creates a lot of demand for the emerging market equities and the fact that the US stocks are doing so well means that the investors are not so concerned about risk of sharp correction.

Since everything is going fine, Asian equities are moving higher.

Do you expect this liquidity to sustain because a lot of these markets are making new highs and we are within 200-point of making all time high for ourselves?

Exactly, and Nifty is at record highs in terms of closing levels; so, yes, we are high but I believe this is justified mainly by the strong long term potential of GDP growth and earnings growth in India, as well as the amazing amount of liquidity that can be used by essential investors globally, who are trying to park it in attractive locations.

I think we will see highs in India fairly soon.

What are the chances of any nasty surprises coming from China?

I don't think it will come from China.

Of course there is bubble there, but it is well supported by the fact that local investors have no other option to invest, except the stock market, because the real estate market there has run out of steam and they cannot invest abroad.

They have lots of money sitting on low yielded deposits; so I don't think we should worry about China too much.

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