SHOWS: HONG KONG, CHINA (May 2, 2013) (REUTERS - ACCESS ALL)

STEFAN HOFER, EMERGING MARKETS ECONOMIST, BANK JULIUS BAER

1. REPORTER OFF CAMERA SAYING:

'How are you interpreting the FOMC policy statement, and how might the ECB follow through with its own when it meets Thursday?'

2. STEFAN HOFER SAYING:

'Well in terms of FOMC itself, there is nothing materially new in the text, perhaps indicating slightly more flexibility in terms of when the Fed is going to be changing the pace of the quantitative easing. But largely, the situation in the U.S. is unchanged. We have a very gradual but persistent improvement in the U.S. labor market which means that the end of QE and the normalization of U.S. monetary policy will take place in all likelihood over the course of late 2014, early 2015. So, from yesterday from the U.S. nothing material new. Now in terms of Europe, the situation is a little bit different. We are looking for a rate cut of 25 basis points today from the ECB. This is because we do have quite a significant risk of a credit crunch, in particular in the peripheral countries in Europe which are still struggling quite a lot.'

3. REPORTER OFF CAMERA SAYING:

'China official PMI data has shown further weakening in the economy. What are the policy implications?'

4. STEFAN HOFER SAYING:

'I think there's a number of factors. But I think in general, I mean if you take a broader look at the range of economic data that's coming out of China, you still have pretty good retail sales. Domestic demand is actually not that bad. They also had a ramping up of the total social financing that has come through. So probably, we're in a sort of choppy period in terms of the data with probably an acceleration coming in a few months' time. This is why I say that the data in China although definitely not great is also far from being a major problem, hence the policy response from the authorities is going to be very minimal I think at this stage.'

5. REPORTER OFF CAMERA SAYING:

'Do you expect China to boost its ties with ASEAN countries as economic growth in the U.S. and Europe continues to slow?'

6. STEFAN HOFER SAYING:

'Well of course. If Chinese growth were to drop below, say, 7% then the impact would be very, very significant. On the other hand what is happening in Asia which is extremely exciting is the potential for actually quite a significant pickup in Japanese growth. And that is in fact where investors pretty much around the world are really focusing on. So for the first time in a long time, Japan is actually overshadowing a lot of the events in the region.'

7. REPORTER OFF CAMERA SAYING:

'ASEAN's smaller economies, as you noted in your report, have done well in equity market returns. Is there more to go for ASEAN markets, or should investors focus back on larger emerging markets such as China, or head instead to Japan where radical policy reforms are taking place?'

8. STEFAN HOFER SAYING:

'Yes absolutely. This is a broader trend that has been happening for a longer period of time. Intra-Asian trade, intra-emerging market trade whether we look at Asia trading with South America, Africa, elsewhere. This has been growing very substantially and this is, we believe, is going to be a major trend going forward for the longer term. Of course at the end of the day, the absolute size of the United States and also Europe will mean that these will remain very significant trading partners also for the longer term, but on the margin if you ask where is growth going to come from? Absolutely it's going to be intra-emerging markets trade with Asia at the top of that list.'