Date:30/05/2006 URL: http://www.thehindubusinessline.com/2006/05/30/stories/2006053004151500.htm

Back Strong bull markets unlikely soon: Societe Generale

At the end of the mini crack, we have seen that people are very well positioned for the new bull market to come in the next few days or weeks `Overall, we are very optimistic about the future after those difficult days'

The Managing Director of Societe Generale Asset Management, Mr Christope Lalo, is optimistic about the future after the recent correction.

However, Mr Lalo says that one should not expect strong bull markets in the next few weeks.

He further states that hedge fund managers are looking for good fundamentals.

Excerpts from CNBC - TV18's exclusive interview:

How you think markets will behave after this correction? What have you seen in the last one-week or so and also how is the money moving around?

After what the market has experienced, it is a very good opportunity. Of course, it has been very brutal and a lot of people have lost a lot of money. But overall, the strong run, which we have been enjoying for the last 12 months, was due for a correction, a healthy correction but it was a tough one. I think the next few days will be interesting.

At the end of the mini crack, we have seen that people are very well positioned for the new bull market to come in the next few days or weeks. So, overall we are very optimistic about the future after those very difficult days.

Could you tell us what size of money has actually started to come back in to markets?

Basically managers of hedge funds, or mutual funds have been expecting some correction not only in India but in other emerging markets as well. So indeed, what we are currently seeing is that people are looking into their positions to get into new trades.

What is very important to understand is that the fundamentals have not changed.

We have been focusing on the last few days because there has been a dramatic move. But over the last 12 months, we have enjoyed one of the strongest bull markets in the emerging markets for the last 5-10 years.

So, indeed it was a bull market and the correction was due in emerging markets, and in commodities. Despite the fact that it caused heavy losses, it was a healthy move.

You run some hedge money in the Asian markets. Do you think some of the hedge fund money will look to exit or lighten up on the pull back rallies or do you think that may not be the case across Asia?

We are focusing on the last few days because they have been very bad. We have experienced the same type of movements last October as well and we also had a pull back in April last year after the GM mini crisis.

So, people have to be reminded that the markets can go up and down. Again, we have been enjoying such a strong bull market that people almost forgot that markets can go down.

So the hedge fund manager is pretty much like the mutual fund manager.

They are nowadays focusing on the fundamentals and we have been looking for levels to enter back into the market, which already was below 10,000 level in India, from where, we have already seen a strong up move in the next few days. So, definitely those markets nowadays are very strong. We might not enjoy the same type of bull market that we have been enjoying over the last 12 months. But overall on 12 to 24 months, we will definitely be going higher.

Do you expect to see reallocation across asset classes, if you are saying there will be low returns? Do you think some of that hedge money might shift to perhaps commodities, real estate whatever?

Over the next few weeks, one should not expect a strong bull market. One of the things, why some emerging markets have gone up so strongly, was the leveraged positions. So people will look much closer to where they will be going to invest, that is why selective stock picking and selective fund picking will be the key to reallocate one's portfolio.