Don’t confuse movements in equity market with economic financial recovery: Seth Freeman, EM Capital Management

In an interview with ET Now, Seth Freeman of EM Capital Management expresses his views in the global economy. Excerpts:

ET Now: The system perhaps is frozen with fear, but what I am particularly intrigued about is what happened to the US markets on Friday night? What triggered that sell-off? Do you think the world is likely to follow the US market, or the US markets are following the world?

Seth Freeman: The US markets are responding to China and also some earning reports and stock moves, in particular, of certain high-profile companies. Frankly, the fact at this time of the year, there are typically lower volumes. So price changes in either direction tend to be distorted and look worse, but if you look at this morning as an indicator, with Shanghai being down over 7 per cent, and a couple of other Asian countries, the NIKKEI down 3 per cent and US futures being down somewhat, I would expect the market to reopen down again.

ET Now: What is the sense that you are getting about what is going to be the next move from PBOC, and after the 8 per cent collapse that we are seeing today? Do you envisage further move from the central bank and they are going to try and arrest the fall in economy as well as the equity markets?

Seth Freeman: I do not really think they look so much at the equity markets. It is important not to confuse movements in the equity markets with the economic financial recovery. The stock market may be an indicator of the future, but just because somebody’s stock account goes up does not mean that the economy is improving. Mrs Yellen is very data oriented, and frankly the data is not as positive as the headline numbers. So I do not think that there is a big concern about an interest increase, because when there is one, I do not believe it is going to be very big either. There is an acknowledgement that this is an incredibly slow recovery.