Saturday, October 3, 2015
Marc Faber : Chinese Stocks to resume the Bull Market after 40-50 percent Correction
Marc Faber, Editor and Publisher of “The Gloom, Boom & Doom Report’” talks about Chinese stocks.
As for Chinese stocks, they went up very strongly over the last year, but recently they crashed just as hard. Is this a precursor to something worse or is it merely a bump on the road towards a still ascendant China?
Well I think that a year ago in June/July 2014, Chinese stocks were very inexpensive compared to other markets in the world. They had been going down relative to the S&P since 2006 and compared to other Asian markets like the Philippines, Indonesia, Thailand... they had performed very poorly.
So a year ago my view was that a) because of the crackdown on visitors to Macau and more importantly because the property market in China was beginning to show cracks, prices were no longer going up and many markets were over supplied so my sense was that domestic money would shift out of the property market or de-emphasise property investments and go into equities, at the same time international investors were grossly underweight Chinese stocks and my sense was that as an international investor you look around the world and see all of these markets, the S&P is up at an all-time high last year already and then you see a market like Japan that two years ago was very depressed compared to other markets, so money went into there.
A year ago what was very depressed relative to everything else was the Chinese stock market. So money flowed also internationally into Chinese stocks and the market in China is relatively illiquid. You have to see. Because most blocks of shares are owned by the government or by large Chinese groups so what is available for trading is not that large.
Then the money flowed into Chinese stocks and they went up by more than 100% within a year and the whole thing became very speculative because in China people borrow a lot of money against what they buy whether it is properties or stocks and so the margin accounts increased dramatically and the margin debt reached almost 4% of GDP whereas in the US it is around 2% of GDP and it is at its highest level ever. So 4% was a very big figure. I think the government´s measure to support the market will largely fail and that eventually there will be more selling pressure and stocks will retreat somewhat more.
Do they go back to the levels of a year ago, to the 2014 lows? I don’t think so. I think this may be the beginning of a new bull market in China but after a 100% rise we could have, like, from peak to trough a 40% correction. Or even 50%.
I think this may be the beginning of a new bull market in China but after a 100% rise we could have, like, from peak to trough a 40% correction. Or even 50%.
Interview conducted by Johannes Maierhofer and Peter Matay
Full Interview - http://www.marcopolis.net/the-big-pic
Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.Dr. Doom also trades currencies and commodity futures like Gold and Oil.
Dr. Marc Faber Tomorrow's Gold
Dr. Marc Faber author of the Gloom, Boom and Doom report is a world class Investor, Doctor Faber 's typically controversial and contrarian views have earned him the label of Dr. Doom. Doctor Doom also trades currencies and commodity futures like Gold Natural Gas and Crude Oil.Even his harshest critics must admit that he's been unerringly correct in his market forecasts over the past three decades . Marc Faber is a Swiss investor.He was born in Zurich, Switzerland. He went to school in Geneva and Zurich and finished high school with the Matura. He studied Economics at the University of Zurich and, at the age of 24, obtained a PhD in Economics magna cum laude. Between 1970 and 1978, Dr Faber worked for White Weld & Company Limited in New York, Zurich and Hong Kong. Since 1973, he has lived in Hong Kong. From 1978 to February 1990, he was the Managing Director of Drexel Burnham Lambert (HK) Ltd. In June 1990, he set up his own business, which acts as an investment advisor and fund manager. Faber is publisher of the Gloom Boom & Doom Report newsletter and is the director of Marc Faber Ltd which acts as an investment advisor and fund manager.