Beware of China bubble: Faber
Posted on 11 September 2013 - 05:39am
Liew Jia Teng
KUALA LUMPUR (Sept 11, 2013): Marc Faber, known as "Doctor Doom" in the investment circle, plans to keep his shares in Malayan Banking Bhd and Public Bank Bhd because they let him "sleep well at night".
"Unlike US banks, Malaysia's are solid and they do not involve in derivatives or gamble," he told a press conference after giving a presentation entitled "Investment Strategy – Where's the Money?" here today.
"Malaysia may not be seen as an exciting market and the stock market is certainly not cheap, but this is a well-balanced economy and stable enough to let you sleep soundly at night," he said.
He said that despite Fitch Ratings recent negative outlook on Malaysia, the country stood out relatively well compared to other emerging countries.
Marc Faber, the author of the Gloom, Doom & Boom Report, views China's huge credit bubble, one that had been growing rapidly since 2008, as the next global financial crisis hot spot.
"The inflation in China is much higher than it seems. Credit growth in China will slow down. It is very much depends on whether they're going into hard landing or soft landing, but this will inevitably lead to economic slowdown in emerging markets," he said.
He sees the colossal credit bubble in China that had been expanding rapidly since 2008 as the next biggest risk to global economic growth.
While he is wary about China, the author of the Tomorrow's Gold – Asia's Age of Discovery is keeping his faith in Asia, even if the Chinese bubble will burst eventually.
"Between now and then, there will be opportunity in various asset classes. I recommend the investors to take a balanced approach to invest in equity, corporate bond, real-estate and gold," Faber told his audience during a luncheon talk organised by MIDF Amanah Investment Bank Bhd.
While he believes that equity prices are not likely to go up significantly from current levels, investors should keep their holdings in Malaysia, Singapore and Thailand, as these markets do not have huge downward risks.
To beat the market, he said, investors should to pay more attention to stocks with low price-to-earning (PE) and low price to sales ratios.
He likes high dividend stocks.
"We are in a bull market that is in the tail-end instead of the beginning but that does not mean prices will collapse. I don't think that stocks are the greatest bargain anymore, but it's not that expensive either," Faber said.
"Consumer sector is not going to explode but it will grow and the companies will expand their market share," he said.
On plantation stocks, he says they may recover if palm oil prices regain its upward momentum.