A big correction is coming seven years into a commodities bull market, but in the longer term commodity prices will continue to rise, global investor Marc Faber told a press briefing in Taipei yesterday.
Faber said the demand for commodities will be curtailed in the short term because of a tightening in global liquidity, slower economic growth and sky-rocketing international crude oil prices.
“Commodity prices will come down in the next six months to a year,” said Faber, who is managing director of Marc Faber Ltd, the publisher of investment newsletter the Gloom, Boom and Doom Report.
Faber also predicted that the growth rate in the world’s emerging economies — such as China, Brazil, India and Vietnam — will by far exceed the growth rate in the US and western Europe in the next 50 years.
However, Faber said that analysts often fail to understand that a country can have strong economic growth and at the same time have a declining stock market. This happens because a stock market is a mechanism that depends on liquidity rather than growth, he said.
“My sense is that these emerging [stock] markets will not go up a lot. From here, they will rather go down more, as the economic fundamentals are deteriorating partly because of inflation that erodes people’s real purchasing power,” Faber said, adding that overall he was not very optimistic about stock markets in emerging nations.
“It’s not yet a buying opportunity in China,” he said.
Faber said he was negative on the US dollar in the long term, but that the US currency may strengthen in the short term because of a tightening of in liquidity.
The TAIEX index has fallen from a peak of 12,500 points in 1990 to stand at between 7,700 and 7,800.
Faber said he did not think the Taiwanese market would go up a lot, but it could outperform other markets in the region because it fall less than the others.
As Taiwanese companies pay relatively high dividends and many are leaders in their fields, Faber said he would rather own shares in a Taiwanese technology company than a US one.
“But the outlook for technology, by and large, is bad,” Faber said, adding that the two main customer sectors of the industry — consumers and financial services firms — were going to contract.
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