Europe Crisis May Worsen, Asia Stocks Fall, Sanft Says

(Corrects Erwin Sanft’s title in first paragraph.)

Erwin Sanft, deputy head of Asian Equities Research at BNP Paribas SA in Hong Kong, comments on the European sovereign debt crisis and Asian equities in an interview on Bloomberg Television today in Hong Kong.

Officials in German Chancellor Angela Merkel’s government are debating how to shore up the country’s banks in the event that Greece fails to meet the budget-cutting terms of its aid package and is unable to get a bailout-loan payment, three coalition officials said Sept. 9.

On the European sovereign debt crisis:

“Things are probably going to get worse before they get better. Everyone’s going into this downturn hoping for the best and we haven’t really seen markets correct as much as they should given the indicators elsewhere.

“Even though people are talking about recession and stagnation in the developed world, this is not what’s reflected in equity valuations yet, even though equities here haven’t done well this year.

“The battle lines in Europe now sit somewhere between Spain and Italy. Much larger economies are being drawn into this crisis.”

On Asian equities:

“Here in Asia, we’re looking at much more downside for markets.”

On China’s stocks:

“China has been the worst performer which is a little strange. If you look at the earnings in China, it’s one of the most defensive markets in the region.

“China’s equity market is very separate from its economy.

“Most of the equity market is made up of government listings. The earnings for the market don’t have much linkage with the rest of the world.

“For China, we should look at the banking sector in particular. We’re down to some very low levels with very high dividend yields. In the short term, those are secure.”

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Susan Li in Hong Kong at sli31@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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