Market has a tendency to give geopolitical pitch a go-by: Andrew Freris
History suggests that all the heat and dust about geopolitics is not going to move the market. But the contest on trade dynamics is going to be a keenly watched one, said Andrew Freris, CEO, Ecognosis Advisory. He spoke to ET Now. Edited excerpts:
How would you analyse the repercussions when we open for trade on Monday, especially for Asian markets? Do you expect retaliation from Russia?
Point number one, okay let us take them one at a time. The markets have got a whole of Saturday and Sunday to think about this. There is concrete evidence that the markets completely ignore it. So, my forecast is Monday will open and nothing will happen to capital markets from either global or Asian ones. There might be short-term reaction and that will be it.
The second point is there is going to be no reaction whatsoever for Russia. There are wire reports from Russian official sources saying no Russian military assets or even the air space in Syria partially controlled by it has been invaded. The Russians have said the Americans, the British and the French attacked targets, but they did not attack us. So, there is no reason whatsoever why the Russians should retaliate.
And the third point is this is not for the first time that United States has sent Tomahawk missiles. They did that last April following another gas attack. So, I am afraid this is hardly any news. Also what kind of strategic planning is that for President (Donald) Trump to say we are going to hit you and we are going to hit you specifically target A, B and C. And he says several days before it happens… so, it is tragic, it is sad, and a lot of innocent people will be killed. I can tell you it is not going to deter us… If they want to use gas weapons again in future, they will.
Actually, that is quite an interesting point you have made that capital markets should not really be bothered about it. Just one quick word on emerging market sentiment in Asia and India. What is your outlook now that correction has come and gone? Do you expect previous levels to be taken out once again or can we go back lower?
Let us stick to India and we know now that the Fed is going to increase interest rates again. Now, tell me what has the Reserve Bank of India done during this period. It has cut interest rate repeatedly. In other words, the impact of how the American interest rates are did not deter several markets. It was not just India that cut interest rates.
So, let us forget a cut in interest rate in the United States. They have no impact whatsoever on a local interest rates, local I emphasise.
Now the aspect that has hit the markets most is concern of a trade war, but frankly India is not involved in that at all. The trade war is primarily between the United States and China. Then it goes to the US and Canada and Mexico and possibly South Korea. India was very much in the periphery and to the best of my knowledge, Trump did say India is running in a bilateral deficit and it is going to pay for it.
Frankly, the Asian markets were much more concerned about the escalation of the trade war, which has been massively de-escalated by Trump with words of praise for President Xi's recent statements during a major international meet.
If the capital markets on Monday are going to be concerned about anything, it will be very peripherally about the strike in Syria and the rest of it is going to be a lock-up and to some extent, global issues.