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INVESTMENT guru Marc Faber only had sober words for
participants of the 8th Annual Pacific Regional
Investment Conference which began on Thursday.
Not only
will the $700-bailout package approved by the US
Congress fail, but the US economy will also continue its
slump and drag the rest of the world with it.
“Decoupling [between the US and Asian markets] will not
likely occur. There is a correlation in asset markets;
if the S&P [Standard & Poor’s] index in the US drops,
most markets will go down. If S&P goes up, the other
markets go up.”
Talking
to reporters later, he said even the Philippines will
not be spared, despite the decoupling believed by some
government economic managers. “Only a Filipino will
believe that the Philippines will be immune from a
global slump. Of course, it will affect the Philippine
economy as already reflected in the decline in share
prices already,” he said. The Philippine equities market
has slid by 60 percent already, he noted, from its peak
in 1997.
Organizers of this year’s conference sought to “calm”
the market and directly address the concerns of the
investment houses, fund managers and other bankers
participating in the event held annually by the
Asia-Pacific Association for Fiduciary Studies (Apafs)
in Manila.
Apafs
chairman Gerard Cruz said the current crisis in the
global economy has driven the content of the conference.
“We have put together a team of experts who can speak to
these issues who’ve been involved in capital markets
through some pretty serious downs. We hope to first calm
the concerns and put some realistic expectations into
what investors ought to be expecting as we go through
the crisis.”
In
contrast to Faber, known as a contrarian investor who
publishes a monthly investment newsletter entitled “The
Gloom, Boom & Doom Report,” Cruz was more upbeat about
the global economic prospects. “There is some hope out
there. To the extent that we’re going through some
turmoil, we’ve done this before, we have gone through
some boom-bust periods and we’ve weathered them. I
think, though, because it’s affecting the capital
markets as opposed to the tech bubble in the late ‘90s,
I think the difference is, it’s affecting capital
markets and it’s putting a squeeze on finance centers on
Wall Street.”
He cited
the US bailout package and the recent coordinated cuts
in interest rates by various central banks around the
world. “All these large economies are engaged,
interacting with each other and demonstrating clear
commitment to putting back liquidity in the market to
calm them.”
Over 320
persons registered in this year’s two-day conference at
the Renaissance Hotel in Makati City.
For his
part, William Thomson, chairman of Private Capital
Limited, a Hong Kong-based wealth management company and
advisor to the London-based Axiom hedge fund group,
described the current economic situation as “going
through the eye of the hurricane.”
A former
senior adviser to the Franklin Templeton Investments
(Asia), Thomson is looking to Asia and the Middle East
as good investment opportunities. “I think Asia has
great value. I can’t say that the [other investment]
funds are going to Asia, but I certainly would recommend
that. Asia and the Middle East are the strongest parts
of the world.”
He also
believes Asia will be affected by the US economic
slowdown but can still grow, albeit at a slower pace.
“In the next few years, they (Asian economies) will be
affected. China’s growth rate is 11 percent but will
probably slow down to 7 percent. The Philippines grew at
7 percent but this will likely slow to 4 percent. It’s
still better than the US which will have zero or
negative growth.”
Meanwhile, Faber described the bailout plan as “throwing
money” at the problem, as he believed that the US
Federal Reserve would have to print more greenbacks to
support the economic package. “We have already reached
the zero hour when a country prints money to help the
current account deficit, and will have no impact on real
economic activity, like Zimbabwe.”
“The
bailout package won’t address the real problem [of the
U.S. economy], which is too much debt. The debt bubble
has already burst. It will result in a disappointing
economic growth and lead to a very serious slump in the
world.”
Like
Thomson, Faber thinks Asia will still be cushioned
somewhat from any impact from the US and global economic
ills, and will not suffer a financial crisis similar to
what happened in 1997-98.
He said
Asian countries are in a better financial position than
the rest of world because they have built up a huge
amount of foreign currencies reserves. “Even with a US
recession, Asia could have a modest growth rate. So the
Asian crisis will not happen in the present time. It
will not be like in 1997.” As it is, he said, the Asian
economies are growing faster than G-7 countries, and the
driver of the future Asian growth is urbanization, as
more people from the rural areas move to the cities. “In
China, 20 million move to the cities annually.”
He
described Asian banks as “rock solid” compared to their
US counterparts because the former have invested their
funds mostly in their respective domestic economies.
“Asian banks are in much better shape than US banks. I
think Asian bankers were just too stupid to understand
structured products,” Faber joked, making a reference to
the derivatives markets that helped spring the US
subprime mortgage crisis. “Even Philippine banks are
better [than the US banks], because they’ve invested
domestically.”
Faber
also cited sectors where fund managers and their clients
could invest in such a real estate, especially in
agricultural lands in the emerging economies; healthcare
(pharmaceutical, hospital management companies);
locally-produced brands which may eventually displace
international brands; commodities such as gold and
silver; tourism especially hotels, casinos, airports,
beach resorts; financial sector (banks, insurance
companies, brokers in emerging economies);
infrastructure; plantations and farmland especially in
Indonesia, Malaysia, Latin America, Ukraine; and banks
in Japan.
On a per
country basis, however, the Philippines was glaringly
left out of Faber’s recommended investment areas. On his
list were Indonesia and Malaysia in Asia, as well as
Latin America and Ukraine.
“In the
long run, the Philippines is okay but it’s not a very
dynamic economy. I think the mining sector offers some
opportunity obviously but then you still have difficult
regulatory issues concerning the mining sector.”
In
Thursday’s conference, Senator Edgardo Angara also spoke
about the recently passed Personal Equity and Retirement
Account Account (Pera), a law which he sponsored.
He told
BusinessMirror the current crisis may impact on
potential Pera beneficiaries such as overseas Filipino
workers, but is confident that they will still find the
account beneficial in the long run.
“[The
global economic crisis] may delay their entry into Pera
because they need the money for consumption rather than
savings because of the hard times. But nonetheless, it
will remain an attractive vehicle for them.”
The Pera
is designed to encourage Filipinos, especially OFWs, to
set aside cash for a retirement fund. It helps
individuals, otherwise not covered by government pension
funds like the Social Security System and Government
Service Insurance System, to build up a nest egg.
The Pera
will be administered by the Securities and Exchange
Commission under supervision by the Bangko Sentral ng
Pilipinas.
Individuals can make a maximum contribution of P100,000
per year to his Pera account, but the amount can go
higher if they are married and have children. “A
beneficiary can contribute also for his wife and
children,” and this will be not taxed by the government,
even when the retirement amount is withdrawn. |
