Kobi Feller, head of IPS (investment products and services) at UBS Israel, estimates that the falls on the Tel Aviv Stock exchange and globally represent a correction and not a change in the trend. He sees the Chinese central bank intervening aggressively to restore investor confidence.
"This is a correction, not a change in trend," Feller told "Globes", "The latest economic figures from the US and Europe have been good on the whole, and in the US the macro picture should even improve in the second half of the year."
Feller calls on investors not to take alarm at the economic slowdown in China. "The significant slowdown in China will shortly be dealt with by the central bank, which will convince investors of China's ability to sustain a high growth rate, even if it will be a little lower than in the past," Feller says.
The International Monetary Fund also estimates that the slowdown in China does not at present amount to a crisis.
The turmoil on the markets has caused a change in expectations about an interest rate hike in the US. If until recently the talk was of the Federal Reserve raising its rate in September, that expectation has now been deferred to December at the earliest.
Feller says that an interest rate rise will send a positive signal to the market. "An interest rate rise in the US is the best thing that could happen to stocks there. It's true that the probability of an interest rate rise in September has fallen and that the focus has switched to December, but a good jobs report at the beginning of September and a positive revision of the second quarter growth figures will put September back to a higher probability than it has today."
Feller added, "An interest rate hike by the Fed will represent an expression of support for the US economy and will be perceived by investors as positive and not negative, especially after the falls on the stock market."
Published by Globes [online], Israel business news - www.globes-online.com - on August 24, 2015
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