Andrew Holland, CEO, Avendus Capital Alternate Strategies
Feb 09, 2018 | Source: Mint
Still some downside? What is interesting about this fall is that no other asset classes reacted. Usually you get a flight to safety, bond yields didn’t fall that much, gold prices fell, metal prices are going to hold up pretty well. So it is kind of unusual for that to happen when you have that kind of turmoil in the market and with the volatility index (VIX) still very elevated in the US, bond yields are virtually where they were before all this happened at 2.78, we might revisit this again, I am not sure that it has all been flushed out of the system yet. So I think the volatility is going to remain I am afraid
I think there are a few things which are important; one obviously after budget a long-term capital gains tax (LTCG), note that free ride for the markets are over now and I think the second thing that the bull market in complacency has been hit very hard and as we go through that in the next week or so, as people look at the different asset classes, they can now look at it.
Start of the bear phase? I am not thinking we are in a bear phrase. I think this is a healthy correction from the excesses that we have seen. Even if you take the falls that we are seeing today in the last few days and not even the recovery, that the US market is still up 30% since President Trump came in and our markets are still up 20% over the past years. So it is a healthy correction which we needed but it is at least highlighted that there is risk and maybe that complacency in the markets will go away now.
So what looks like a good entry point now: The way I look at it is that if you mentioned at the very beginning about that overseas funds will be looking to sell and we are seeing that through ETFs as well in more passive ways, so the opportunities land up in the largecaps because that is where the liquidity is. So I think you are going to find quite a number of—obviously we like the private banks, we like selective autos, we like selective metals, so all the favourites will become cheaper but the sectors which have been overextended as well in terms of optimism where those share prices come back to range we should be more happier.
Would you reconsider IT stocks? IT has been—we have been very negative on IT but the latter part of last year we became more neutral because the damage has been done. We are very pleasantly surprised with the commentary from the IT companies. So we could be more neutral in our stance but it is a great place to hide.