Why it makes sense for global fund managers to be underweight EM: Manish Singh

Largecap stocks in the US have been trading like penny stocks. It is mindboggling and there has been a completely different regime shift. What if that gets into EMs as well and the index starts trading in a crazy up and down move? Manish Singh, CIO, Crossbridge Capital LLP, in conversation with ET NOW.

It is something which is making traders, investors all across the world happier and less nervous that finally Mr Biden and Mr Putin will sit together and try and find a solution to the Ukraine crisis. How do you see things panning out?
I would say that it is definitely good news because the news keeps changing very fast and so one should not jump to any conclusion, but the de-escalation definitely will be received very well. It does not come as a surprise because while last week there were expectations of a full blown conflict, I do not think anybody had that in their analysis.


So this in many ways confirms the severe doubts that a lot of people had about this. But one thing people have to really understand is that the war is ongoing. The kind of war we have seen now and will see in the future will be about information war and that has been happening.

What is your position on emerging markets in the light of the coming rate hikes in the US? The Ukraine issue is simmering and back home in India, the UP elections are on. What is your position on emerging markets (EMs) and India in particular?
I am EM underweight. I have been so for some time, given what is happening and the doubts about what could happen on the macro front and also the Fed interest rate story. I would say that unless we have seen the first rate hike which is going to be in March and then see what happens in terms of and increases from there, it is prudent to be underweight EM.

Now this is only for people who are managing global portfolios. If you are managing an EM portfolio, then you cannot afford not to be invested. I am not recommending that people should be in cash all the time. One has to keep looking for the best stocks that one wants to invest in and then do dollar cost averaging. I buy it at different prices at different levels. I am anyways not recommending that one should not be invested in EM or one should not be invested in India but purely for a global portfolio I think the risk reward was not as attractive on EM side as it was on the other side simply because of what Fed is about to embark on.

We have seen how the equities have behaved. Largecap stocks in the US have been trading like penny stocks. It is mindboggling and there has been a completely different regime shift. What if that gets into EMs as well and the index starts trading in a crazy up and down move? I do not want to take that risk and I can afford to because I have other investments that I can make and in that context, I would say that I am underweight EMs.