Stock markets worldwide have become ôcollateral victimsö of the US subprime mortgage crisis, even if the credit problems are generally far-removed from equities, says Paris-based Pascal Blanque, global chief investment officer at Credit Agricole Asset Management.

But when the dust finally settles on the subprime crisis û and Blanque is confident a solution is underway û many investors will likely veer away from complicated investment products and turn to equities.

ôAfter the crisis, and if it is managed well, many investors will be reluctant to go to credit even with re-pricing,ö Blanque says. ôWe will see investors avoid complicated products and go to products with visibility and transparency, and equities will be well-positioned from that standpoint.ö

September will be a crucial turning point in the long-running subprime crisis, Blanque says, noting that large amounts of asset-backed commercial paper (ABCP) and conduits need to be refinanced in the coming weeks. Whether or not financing will be available to those ABCP and conduits over the coming weeks will determine whether the crisis will worsen or start to ease.

BlanqueÆs assumption is central banks will likely step up to provide liquidity, but will stop short of bailing out banks in trouble.

ôThis is the greatest challenge for the central banks now,ö he says. ôThey have to make sure there is enough liquidity in the system for three months. If that happens, we will manage to get through September reasonably okay.ö

Central banks are in a precarious situation. They canÆt be seen as tolerating complacency by being ready to bail out banks. But at the same time, they canÆt afford to sit back and do nothing while a systemic contagion takes place.

Cutting interest rates isnÆt the most appropriate solution to the credit problem, Blanque says. ôThere should be no bailout because that will simply create new bubbles down the road.ö

Blanque says itÆs worth noting that Asia has remained relatively resilient throughout the subprime crisis, due in part to the growing domestic participation in local stock markets.

Ray Jovanovich, chief investment officer for Asia, notes that CAAM experienced record-high inflows to its portfolios in this region in August, despite the weakness in the stock markets. And the money that came in wasnÆt from investors looking for bargains in order to turn in quick profits because there have been no significant redemptions so far.

ôDomestic participation in Asia is growing in size. This is still a new phenomenon,ö says Jovanovich.

CAAM manages around $764 billion worldwide, including around $84 billion in Asia. CAAM is overweight on stocks within a global portfolio, and is overweight in Asia within an international equities portfolio.