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Markets unlikely to fall because of US-China tensions: Crossbridge Capital

‘Markets pretty much knows that this tension is going to continue’

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Last Updated: Jun 03, 2020, 10.59 AM IST
We have also heard in Italy that the doctors there are saying that they are not seeing the same viral load.
There is a genuine understanding that the virus may not be as potent as it was thought out to be, says Manish Singh, chief investment officer.

We are seeing strong moves in the US markets with investors taking heart from the re-opening of the economy. It looks like they are shrugging off some of those widespread protests that are underway in the US for a week now.
You are absolutely right. The market is clearly focussing on the relative basis of where we were two weeks or a month ago in terms of lockdown. We are now seeing parts of the economy opening up. Of course, we have a protest going on which clearly is not very comforting to anyone but on a relative basis, you will see that it has opened the markets and the economy far more than we were two weeks or a month ago. So the market is taking comfort from that.

Also, there is a genuine understanding that the virus may not be as potent or as damaging as it was thought out to be. As you are seeing from the protests, clearly there is no social distancing being practiced and we will see what happens. If you do not have a high incidence of coronavirus in the US by 9 or 10 June; then it is probably over in the sense that maybe the virus is much weaker. We have also heard in Italy that the doctors there are saying that they are not seeing the same viral load when they do the SOP test. So a lot of things are giving comfort to people that maybe the lockdown is excessive and it will come off as the politicians realise that. Then it will be much easier going forward and the market is responding to that.

What do you make of the continued tensions between the US and China? Do you believe that could lead to reversal of some gains that we have seen in the last couple of days?
I would say that is a multiyear story as we have been discussing for some time now and it is for both sides to understand what advantage they can get from each other and how they can get better from each other. But I think the US should not underestimate the planning that China has been doing and the steps that they have been taking for a long time now. Of course, the US has to respond because the US, economically speaking, is the world leader and they have all the advantage; so they have to protect that advantage. I do think particular sectors, especially the tech sector might get affected as US tech companies are selling to China and the Chinese companies are also selling to the US. However, there is going to be a lot of competition. So I think some sort of prudence will continue.

Of course, if there is regulatory involvement being passed by the US that they are not going to allow companies, then the Chinese companies are going to look elsewhere. But then Chinese companies have been planning this for some time because they wanted to move the listing from Europe to Hong Kong. So it might actually not help the US in the long run. But the US has to be seen doing something to counter China; so they will do that. Overall, I do not think it is going to bring a fall in the market because the market pretty much knows that this tension is going to continue and there is no quick solution and both sides are going to keep punching at each other and it is just going to continue.

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