Making sense of market volatility: Peter Westin, Aton
RT: How long is the selloff likely to continue? What is likely to see it end?
PW: “Well I think it is really that people are looking for this turmoil to end, and really for the panic to stop, because right now you are having people responding to still the US downgrade, but, more importantly, the situation in Europe is far from over and people would probably be expecting to see a statement out of the ECB and the Fed to calm the markets.But for how long this can continue, it is anybody’s guess, but I would expect that given that we have fallen so much, that I wouldn’t exclude that you would have a couple of days with very strong rebound.But I think that that will be temporary and we will roll over and go slowly down.Because what was bad a week ago is still equally bad if not even worse. “
RT: Which stocks are faring best? Which are doing worst?
PW: “Well, as we have seen historically, it is what we know as defensive sectors that are doing better. But obviously you are making losses but you are limiting your losses. And these are mainly telecoms, selected consumer staples, and utilities. And part of the story here is that people might not be able to get out, but what you are seeing in particular is the sectors that get hammered are the ones that are more cyclical. So energy, materials and to some extent the financials.”
RT: Have there been signs of the government stepping into the market – either in Russia or internationally?
PW: “That’s more related to the bond market to be honest, we haven’t seen any intervention here. But what is interesting is that we have had a sharp weakening of the currency, and this is where we might see the central bank taking some action, because clearly we are down significantly on the currency, and that is affecting he market as well. If you look at the differences between the RTS, which is down a little bit over 2% but the MICEX is down close to 6%, the difference there is partly explained by the currency, because one is obviously rouble denominated, and one is dollar.”
RT: At which point will they be so cheap as to see bargain hunters moving in?
PW: “Well I think we have already, there is indications that we have bottomed.For example this morning there seemed to be a rebound in Asia. We have started on a less negative note than if things had got slaughtered.I do think that there’s been looking at the cheapness of the market, valuation targets in this environment matters less. It is more an issue of a change in sentiment that needs to happen and then people will go back and look at valuations. But I think we are not there yet.”
RT: How are Russian stocks faring against other EM?
PW: “Well initially it looked like, first of all, we’ve been not too bad compared to other markets.But at the same time it is interesting to see that over the last couple of weeks we’ve seen that emerging markets in particular were outperforming developed markets.Then we have kind of caught up, and as we can expect when we see the VIX the volatility S&P jumping to almost 50, that is a level where really the emerging markets get hit, and Russia has done slightly worse than the emerging markets average – something we have seen in almost every downturn. Well Brazil, has been the worst affected.Over the last couple of days we have seen the biggest selloff in Brazil, so in that respect Russia has done significantly better.Brazil was down more than 8% yesterday.”
RT: How are Russian stocks faring against other energy exporters?
PW: “Well it looks like, at least, if you are looking at Oman, Qatar, and also Saudi Arabia, well it depends on which index you look at.
We are down 3% in Saudi Arabia for example, and it seems to be that the Arabian countries are doing slightly better than what we have seen in Russia.”