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    'No' vote in Greek referendum can lead to sharp selloff in markets: Nicholas Teo, CMC Markets

    Synopsis

    Ultimately, the markets do not like uncertainty and ironically the next few weeks will only entail uncertainty, says Nicholas Teo.

    ET Now
    In an interview with ET Now, Nicholas Teo, Market Analyst, CMC Markets, shares his views. Excerpts:

    ET Now: IMF reports suggest that Greece needs extra funds to repay close to $60 billion over the next three years. What is it that you make of all that has transpired so far and the kind of implication that it has across the globe?

    Nicholas Teo: The only certainty here is that even with the outcome of the referendum, we shall still be far from getting any sort of a resolve. Whether it is a 'yes' or a 'no', I think there are many more steps that are needed to be taken before anything happens in giving some sort of a comfort as far as markets are concerned. As a result of that, we are going into a period of calm because the Troika has already said that nothing is going to happen even after votes come up.

    If the vote comes out as a 'yes', it would mean that a bigger degree of austerity would probably be enforced on the people of Greece. We don't know if it will lead to an uprising. If the vote goes 'no', nobody knows how the hope potential of a Greek exit will be paid out. Ultimately, the markets do not like uncertainty and ironically the next few weeks will only entail uncertainty.

    ET Now: Rating agency Fitch has also raised a red flag on the banking system of Greece. How big an impact would you see on the banking system, would you see it collapsing completely if Greece does exit from the Eurozone?

    Nicholas Teo: Yes, the numbers do suggest so. In the past, not just IMF but other agencies have filled the debt gap of countries temporarily, but more concrete measures are needed to be taken. Right now, nobody is willing to take that stance or make that move on the Greece issue.

    ET Now: What is your view on the Euro which has so far managed with the Greek crisis? Are there any downside risks to the currency in the short-to-medium term?

    Nicholas Teo: Yes, there certainly is. The EU region has managed a nice rebound in terms of being able to report traction in growth down there. I dare say that some of the PMI numbers, consumption numbers and indicators, inflationary numbers and obviously GDP numbers from the different regions of the Eurozone have proven to be more substantial. So, with that, the euro-dollar has also seen some nice support.

    US dollar has weakened in the last couple of days and that has added to further strength where the euro-dollar is concerned. Now, the Greece factor on the euro-dollar remains unclear and it will continue to remain unclear. That could ultimately be the drag which traders would be more than happy to latch on to.

    ET Now: What do you make of the Chinese stocks at this point of time? Is it good time to invest or one should just stay away?

    Nicholas Teo: We are seeing another sort of turmoil being played out and it has been largely recognised that the Chinese market has been fuelled by two things. One, easy and cheap money from margin lending and, two, they are getting a new brand of investors or traders coming into the ball game. They are mainly novice investors or traders, like pensioners, school teachers, retirees etc. These investors are very dangerous. They have ultimately led to this very acute sell down that we have seen in the last two-three weeks. Literally overnight, the Chinese markets have gone from the best to the worst.

    The Economic Times

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