Sunday, March 8, 2009

Jim Rogers on China and Macro

Bloomberg News:

China’s stimulus spending will help its economy overcome the global recession sooner than the U.S. and other countries, investor Jim Rogers said.

China’s reserves allow the government to spend on projects that will make the nation more efficient and competitive as the global economy recovers, said Rogers, the author of “A Bull in China: Investing Profitably in the World’s Greatest Market.” Signs China is taking steps to liberalize its currency will also benefit the country, he added.

“I certainly expect China to come out of it sooner than the U.S.,” Rogers, chairman of Singapore-based Rogers Holdings, said in a Bloomberg TV interview in the city-state. “They seem to be spending the money on the right things. China is doing a far better job than the others.”

Premier Wen Jiabao reiterated last week the government’s pledge to “significantly increase” investment in 2009 to help counter the slowest growth in seven years. He didn’t specify new stimulus spending in addition to a 4 trillion yuan ($585 billion) plan announced in November.

The People’s Bank of China cut interest rates five times in the final four months of last year, including the biggest single reduction since the 1997-98 Asian financial crisis. The government is targeting growth of 8 percent in 2009, after the economy slowed to a 6.8 percent gain in the fourth quarter.

Yuan, Yen, Dollar

China will allow trade settlement in yuan with Hong Kong soon, central bank Governor Zhou Xiaochuan said at a briefing in Beijing on March 6. President Li Lihui of Bank of China Ltd., the nation’s largest foreign-exchange lender, said yesterday in Beijing the bank is already conducting trial international yuan settlements in Shanghai and Hong Kong.

“I’m glad to see they’re taking yet another step towards convertibility,” said Rogers, who in April 2006 accurately predicted oil would reach $100 a barrel and gold $1,000 an ounce. He said he owns Japanese yen as he expects more of the money to “come home.”

Rogers added he plans to sell his remaining U.S. dollar holdings later this year because the world’s largest economy isn’t a “safe haven” for investors.

“I plan later this year to get out of the rest of my U.S. dollars,” he said. “It’s had an artificial rally too but it’s a terribly flawed currency. The U.S. is printing money as fast as it can and that’s always throughout history led to currency problems down the road.”

Rogers on June 30 advised investors to avoid the dollar “at all costs” as the U.S. economy slows, and favored commodities. The dollar has risen against nine of the Group of 10 currencies since then, according to data tracked by Bloomberg.

Rogers added he remains bullish on agriculture and that commodities are “the only area of the world economy I know which is benefiting.” He said he owns “some” gold and silver, and regards silver as “cheaper.”

Water, power and other infrastructure companies’ shares are favored because their earnings are less vulnerable during the global slowdown, Rogers said.

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This work by Nicholas E. Radice is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.