Global Stock Selloff to Continue on EU Debt Crisis: Experts
Major Asian stock markets dropped between 2 and 4 percent on Monday after the resignation of European Central Bank’s de facto chief economist Juergen Stark heightened uncertainty for investors. A number of analysts and investors told CNBC they forecast a further global selloff given a lack of clear policy solutions from Europe.
Enzio Von Pfeil, CEO of Commercial Economics Asia said Stark's resignation was particularly bad news for the markets because he was seen as providing German discipline as a hawk on monetary policy. He suggested that investors buy safe havens such as gold and U.S. Treasurys because Europe's uncertainty was set to continue for some time.
The selloff has made shares cheaper, with the S&P 500 now trading at around 13-times current earnings and the FTSE 100 at 10.5 times earnings. But Andrew Freris, Chief Investment Advisor for Asia at BNP Paribas Wealth Management, said he still wouldn't be buying stocks.
"Actually they're cheap for a very good reason. They're cheap for the reason that investors and expectations about further downward adjustments of earnings have actually made them cheap," he said.
Freris said if he had to choose one market, it would be the U.S. because fiscal and monetary stimulus would support stocks in the short-run.
"If somebody puts a gun to my head… you have to choose one equity market, United States will be the equity market to be in," he said.
The selloff has been particularly painful for Hong Kong based South Ocean Asset Management, which went to fully-invested in small and mid-cap Hong Kong listed stocks in August. Its Hong Kong Partners LP fund has dropped around 22 percent so far this year.
"Do I have one foot on the window sill out here, one foot on the banana peel? Yeah, I'm scared to death about what's going on," said Brook McConnell, President of the firm.
But McConnell added that he had been through a number of such selloffs since 2000 and he felt the selling was nearing an end.
"Last month, there was $8 trillion taken off the global markets. So, right now is about as ugly as it gets," he said. "It's going to be close to a bottom, I would think."