Jim Rogers Says China Equities, Commodities Will Boom
June 26 (Bloomberg) -- Jim Rogers, who joined George Soros to start the Quantum hedge fund in the 1970s, said China's stock market will boom because the economy is improving and the government is encouraging investment in equities.
Tourism, agriculture, energy and airlines are among the areas that will surge, said Rogers, 63, who started investing in Chinese stocks at end of 2005 and plans to buy more. China's economy doubled in size over the past decade, overtaking the U.K and France to become the world's fourth-largest economy in 2005.
``We are in line with the view by Jim Rogers on the outlook for China's stock markets, which will perform fairly well in the coming years,'' said Zhao Zifeng, who helps manage the equivalent of $1.1 billion with China International Fund Management Co. in Shanghai. Zhao said he agrees with the industries Rogers favors, except airlines.
China's Shanghai Composite Index and Shenzhen Composite Index fell by about half in the five years to the end of 2005. This year they've rebounded, with Shanghai gaining 39 percent and Shenzhen 50 percent, making them among the 10 best performers of the world's 80 major equity markets tracked by Bloomberg. The government's success in disposing of more than $200 billion of non-tradable stock has helped to fuel the rally.
``Over the next few years, China's stock market will be one of the best in the world,'' Rogers told a forum in Beijing on June 24. ``I've sold out of many stock markets in the world. I have been buying Chinese stocks. If the China market goes down, I would hope to buy more.''
Citigroup, Fortis
China ended a yearlong ban on share sales last month to attract bigger companies to domestic markets, now dominated by smaller, state-owned manufacturers. So far, 40 so-called qualified foreign institutional investors, including Citigroup Inc. and Fortis, have been allowed to invest in a combined $6.895 billion in mainland stocks and bonds.
The nation's stock market turnover in May jumped 80 percent from the previous month to a record 715.8 billion yuan ($89 billion), the China Securities Journal said on June 18, citing the China Securities Regulatory Commission. Shares rose today, with the Shanghai Composite Index advancing 1.4 percent and the Shenzhen Composite gaining 1.5 percent.
Still, not all Chinese stocks will do well, and Rogers expects real estate to suffer. ``The government is trying to cut back and ease speculation,'' he said. ``The only thing is they haven't gone far enough yet.''
China in the past two months has adjusted loan, tax and land policies aimed at curbing property prices, including raising the minimum down payment for larger apartments. Real estate investment, which accounts for a quarter of total investment, rose 21.8 percent in the first five months, from a year ago.
Commodities
Rogers correctly predicted a bull market in commodities that began in 1999 and helped to send oil to a record and gold to a 26-year high. He has written about his travels across China and the rest of the world by motorcycle in the books ``Investment Biker'' and ``Adventure Capitalist.'' He also wrote the book ``Hot Commodities.''
Rogers said if he looks for new opportunities in commodities today, he would start with agriculture. ``I think there will be fortunes made in agriculture in the next decade.'' He is looking at cotton, coffee, wheat, soybeans and sugar.
Cotton futures have risen about 6 percent in the past month because of concern over drier whether. Still, they are trading 53 percent below $1.15 a pound, reached in 1995. While cotton and coffee have been gaining, prices for copper, zinc, and gold have declined from records in the past month.
Loss of Farmland
``Agricultural prices are historically very, very low,'' Rogers said. ``Inventories are the lowest in 34 years. We haven't even had a major worldwide drought in many years.''
Agricultural prices will also gain because China's demand has surged compared with 25 years ago, and the nation is losing farmlands, Rogers said. ``In Beijing, you now see a lot of restaurants. You wouldn't see that many 25 years ago,'' he said.
Rogers told the audience at the conference organized by the Beijing University that the best advice he can give on investing is ``do your own homework.'' When asked what his strategies are, he said: ``When I find something cheap, when I think there are fundamental changes and things might get better, I buy.''
``Supply and demand are out of balance for the commodities market and that's where the bull market is,'' Rogers said. ``All commodities over the next decade will be much higher.''
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