(Bloomberg) -- Goldman Sachs Group Inc. Co-President Harvey Schwartz said he believes investors are confident that stocks will bounce back from this month's rout and welcomed efforts to bring interest rates back to normal.
“Certainly people are looking at this as partially a buying opportunity, which is why you saw the market reaction on Tuesday” when U.S. stocks rose, Schwartz, 53, said in an interview with Bloomberg Television from Hong Kong Wednesday.
Last week's selloff was a “healthy correction” in response to the prospect of higher interest rates stemming from wage inflation in the U.S. and better-than-expected global economic growth, Schwartz said. This week's drop, by contrast, was “much more about a systematic liquidation” as participants adjusted positions in a market that got “too crowded,” he said.
Asian stocks on Wednesday recovered some of the losses sustained in the global rout, joining the U.S. rally as the spike in volatility that roiled investors in arcane exchange-traded products eased. Schwartz said he sees moves to normalize interest rates as “quite a healthy thing” as long as the pace of adjustment isn't too fast. An orderly unwinding of monetary stimulus would create a better environment for fixed-income clients and, by extension, the firm, he said.
The MSCI Asia Pacific Index rose 0.2 percent as of 4:30 p.m. in Hong Kong, rebounding from a 6.1 percent drop in the three days through Tuesday but paring back its earlier intraday gain of as much as 2.4 percent.
China Commitment
Goldman Sachs in November shook up the leadership of its vaunted fixed-income, currencies and commodities business after a number of stumbles called its strategy into question. Poor performance in commodities was the biggest driver of a 30 percent slide in the bank's FICC net revenue last year, Chief Financial Officer Marty Chavez told investors.
Schwartz, who is in Hong Kong for Goldman's Global Macro Conference, said the firm is “fully committed” to China after adding headcount there last year. The New York-based bank is among foreign firms that are keen to take controlling stakes in their Chinese securities ventures, after authorities there last year announced moves to lift a 49 percent ownership cap.
He also lauded blockchain, saying the digital ledger technology has the potential to redefine areas of financial services, while adding that it “might take a while.”
Schwartz was named co-president along with David Solomon in December 2016, positioning the two executives as possible successors to Chief Executive Officer Lloyd Blankfein. They succeeded Gary Cohn, who left the New York-based bank for a job in the Trump administration.
--With assistance from Dakin Campbell and Steven Crabill
To contact the reporters on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net, Tom Mackenzie in Shanghai at tmackenzie5@bloomberg.net.
To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Russell Ward
©2018 Bloomberg L.P.
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