BlackRock's Koesterich says expects Greeks to approve referendum

By Ross Kerber BOSTON (Reuters) - Greek voters will likely approve a bailout offer from creditors in a referendum set for Sunday, said a top strategist for BlackRock Inc , the world's largest asset manager. In a telephone interview on Thursday, Russ Koesterich, BlackRock global chief investment strategist, said he expected "some type of knee-jerk relief rally" as a result of the referendum even though markets have already priced in anticipation by most investors of a "yes" vote on the bailout. Based on polling, Koesterich said: "The vast majority of Greeks still want to be in the euro. Clearly a 'no' vote puts that membership in peril." Greek voters are being asked to decide on Sunday whether to accept bailout terms from creditors, provoking a tumultuous domestic debate. Koesterich's expectations are in line with those of other U.S. investors, though recent polling makes the result hard to forecast. Koesterich warned that the political environment was still fluid and that the odds could still change before Sunday. A "no" vote on the ballot question, he said, could lead to the sale of risky assets, similar to what occurred on Monday, when U.S. stocks fell around 2 percent and some European indexes were down more. Still, Koesterich said he believed the market impact of Greece's exit from the euro, if it happens, would be limited. "I think it would be a temporary event," he said. BlackRock has advised Greek officials in the past. A BlackRock spokeswoman said the company would not comment on advisory relationships. New York-based BlackRock has $4.8 trillion (3 trillion pounds) under management but data from the Lipper unit of Thomson Reuters show a scant $200 million or so of BlackRock stock and bond holdings in Greece. Asked about U.S. equities, Koesterich called U.S. stock valuations "somewhere between fairly valued and a bit stretched." A correction of as much as 5 or 10 percent could occur once the U.S. Federal Reserve starts raising interest rates, he said, and longer-term equities gains should be more modest than in recent years. “Valuations are elevated, relative to history. But you have a benign environment of low rates, low inflation and a decent credit market. Given those conditions, equities can go higher,” he said. A correction could be a chance to buy technology and financial companies that would benefit from a stronger economy, he said. (Corrects to show market prediction in paragraph six was a comparison with trading on Monday rather than specific percentage changes) (Reporting by Ross Kerber; Editing by Lisa Von Ahn and Meredith Mazzilli)