The Hindu Business Line : Sub-prime impact on equity markets

At the global level, especially in advanced markets such as US, UK, France, Germany and Japan, to name a few, the linkages between markets are strong. Pricing and participant linkages are strong. As interest rates have risen and sub-prime has affected risk appetite (investors are now showing appetite for lower risk), equity markets have been impacted. As FII flows and hedge fund investments have been significant factors in emerging markets, the developments in the US have spread the low risk appetite to other markets and lead to high degree of volatility in prices and price weakness.

What is the impact on India?

The sub-prime and credit market crisis is not likely to have an impact on the fundamental story in India. It is likely to have an impact on sentiment and liquidity flows. This could lead to high volatility and corrective phases. It does not change our long-term outlook and our view on likely trends in medium term in the markets.

Are there any impact of these developments for Sundaram BNP Paribas Asset Management?

This development does not impact the performance or liquidity of any fund of Sundaram BNP Paribas Asset Management.

— Redemption, if any, and subscription requests will be processed as usual.

— The three funds of BNP Paribas Investment Partners (impacted by the events) are in no way connected with the investments made by Sundaram BNP Paribas Asset Management under its equity, fixed income as well as short-term funds.

— Sundaram BNP Paribas Asset Management does not have any exposure in these funds or to the sub-prime / securitised debt market in the US.

Specifically, on Sundaram. BNP Paribas Global Advantage Fund:

— The development will not have any impact on the investment strategy of Sundaram BNP Paribas Global Advantage.

— The fund is yet to start process of deploying assets in the sub-funds.

— The fund will invest in the real estate asset class though mutual funds that invest in real estate stocks. The fact sheet of the proposed real estate focused fund is attached for reference.

— The fund will not invest thorough mortgage-backed securities. These securitised instruments or funds investing in them have never been on the radar as potential investment options for Sundaram BNP Paribas Global Advantage.

— The portfolio will invest in a fund focused on Asian real estate stocks; there will be no exposure to the US market and even in the initial indicative portfolio, the US exposure though the World Real Estate Fund was 2 per cent; with the emphasis now fully on Asia, even this modest exposure will not be there in the fund portfolio.

— Any dips in stock prices in emerging markets linked to the US crisis will only make the entry point for investing the Global Advantage funds more attractive.

Pending deployment in overseas funds, the NFO collection has been deployed in the overnight market in India through repo and CBLO.

(Excerpted from “A note on Markets” by Sundaram BNP Paribas Mutual Fund and BNP Paribas Investment Partners)

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