Tips from Dr Doom and investment guru at BT-Julius Baer dialogue
By JAMIE LEE
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BUY Asian equities, gold and soft commodities.
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| DR FABER He has hit out against the US Federal Reserve for cutting interest rates and pumping 'easy money' into the economy |
Those were the investment tips from V Anantha-Nageswaran, chief investment officer at Julius Baer, Asia-Pacific, and fund manager Marc Faber at yesterday's Business Times dialogue that was held in partnership with the Swiss bank.
Analysts have expected dismal export numbers for export-heavy economies in Asia and were quick in bringing down earnings estimates, said Dr Anantha-Nageswaran, adding that this means 'pessimism has taken root' in regional equities.
'We look at small export-driven markets in Asia to start accumulating,' he told the dialogue participants, referring mainly to Singapore, Hong Kong, South Korea and Taiwan.
He added that stocks in bigger markets such as China, India and Indonesia could get cheaper as investors remain hopeful that the size of the domestic markets would act as a buffer.
'There is still a bit of denial in these markets,' he said.
Dr Faber, otherwise known as the Dr Doom for his bearish and contrarian calls, noted that the dividend yields for Asian stocks in countries such as Singapore and Thailand are about three times higher than government bond yields.
'Now, I'm sure dividend yields will be cut, say by 50 per cent, maybe even more, but at least you pay to wait at these levels,' he said.
'I'm not very optimistic that there will be a bull market in the future, but I think there is also risk to hold cash with banks (in terms of getting no yield),' he said.
Both speakers also saw value in Asian financial stocks, due to their stronger balance sheets, compared with their Western counterparts.
'They also never understood CDOs,' said Dr Faber.
As for gold, it has kept its value over the last seven years when measured against most currencies such as the euro and the dollar as well as some stock indices, said Dr Anantha-Nageswaran, adding that the value of gold can at least double over the next 12 to 24 months.
Soft commodities can also be a good hedge against inflation as well as against climate change, he said, and recommended that investors hold them for the medium-term.
Dr Anantha-Nageswaran was bearish on the UK pound because of the high leverage that the economy is bearing. He noted that the size of financial assets in the UK was eight times that of its GDP, compared with the US at four times.
'Some people have started referring to the UK pound as the British peso,' he said, noting falling wages, investments and manufacturing at the same time.
'I think that's a fair description of what's going on there,' he said, adding that investors holding the pound should sell on strength.
Dr Faber also hit out against the US Federal Reserve for cutting interest rates and pumping 'easy money' into the economy.
'Mr Bernanke and Mr Greenspan - they have achieved something that nobody else has ever achieved before, that is to create a bubble in everything,' he said.
When asked by BT's associate editor Vikram Khanna whether a moderate inflation could help to ease leverage by reducing the real value of debt, Dr Anantha-Nageswaran said that the asset bubbles now suggest that moderate inflation has not been used.
One participant also asked Dr Faber if it was fair to blame the US government for not calling a property bubble when some states of America were unaffected. In response, Dr Faber said that though this was true, bubbles tend to have certain sectors of the market surging faster than others. 'In the US, there are 373 people per one medical doctor, but in California, there were 52 people per one real estate broker,' he said. 'That tells you the extreme that we had in the housing industry in some areas of the United States.'
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