|According to Jesper Koll, chief Japan economist, Merrill Lynch, though Japanese retail investors are reducing their overseas exposure including in India and Australia, as there is a big reduction in the global risk appetite, yet they are very positive on the Indian long-term growth story. CNBC-TV18 shares with domain-b excerpts from its exclusive interview with Koll.|
How significant is the extent of the money being pulled out of global equities from Japan right now?
We are clearly seeing a speedy reduction in the global risk appetite and the Japanese share market was, as you know one of the big performers until April this year, the share market was up almost 50 per cent from August to September last year. The rush to take profits is hitting the Japanese Nikkei very hard right now.
Apart from Japan as an equity market, for emerging markets any handle on what sort of money was being invested from Japan and how much may have been pulled out?
I think what you see is that Japanese investors, retail investors in particular, are reducing their overseas exposure, so withdrawal from the Australian stock market and withdrawal from the Indian stock market are the moves that one is seeing right now.
However, I do not think that this is going to last very, very long. Clearly we have got a violent, abrupt reaction right now but I think that at the end of the day over the next two to three months some calm is going to return, because here, in Japan people are very cognizant of the high growth potential of particularly the Indian market.
By when do you think most of the adjustments might be done, or do you think people will actually return to long-term value?
You put your finger on it long-term value, the growth; the economic fundamental story has not gone away. Right now we have got this spectre of global interest rate increases spooking the global stock markets, whether it is Japan, whether it is in Wall Street, whether it is in Korea.
The fear of tighter monetary conditions, of higher interest rates is giving us this very sharp and violent adjustment down. However, longer-term investors will view this as an opportunity, the value story, and the long-term growth story is still there and that applies for Japan, India and many of the other emerging countries.
But tactically, is it a different game for hot money that maybe coming from Japan versus the retail interests that you have pointed out?
That is exactly right. The hot money story from Japan into the emerging markets like India has always been a little bit overblown.
The hot money story really is the international community of speculators, the international community of hedge funds. The retail money here from Japan has much stronger and longer legs to stand on.
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