Jim Rogers Buying Yuan and Chinese Stocks

DJ UPDATE: Investment guru Jim Rogers said Monday he started buying into Chinese and Taiwan stocks in the last few weeks. Stocks in mainland China have declined in a "nice correction," he said at a media briefing in Hong Kong, and if there is another drop in the market, Rogers said he would "buy a lot more." Rogers, who co-founded the Quantum Fund with George Soros in the 1970s, recommended looking closely at companies that are less affected by economic slowdowns such as those in the water purification, agriculture and power generation sectors. On the other hand, he is staying away from China''s real-estate sector, which the Chinese government is trying to cool down. Rogers said he started buying Taiwan stocks five to six weeks ago. "For the first time in 60 years, there''s peace between Taiwan and China," which benefits both economies, he said of his decision. Taiwan stocks rallied after the island''s presidential elections last month amid expectations that Ma Ying-jeou, Taiwan''s new president, will boost the economy by improving ties with China. Fund managers have been buying shares in Taiwanese companies with business interests in China, as well as tourism-related stocks, which stand to benefit. Rogers, who noted that this is the first time he has bought into Taiwan, has been investing through indexes. He has also been investing in specific industries, but declined to give more details.

Along with his recent investments in China and Taiwan, Rogers said he is bullish on the Chinese yuan, which he called "the safest investment now versus the U.S. dollar."Rogers said he has holdings in the yuan, or renminbi, and plans to buy more of the currency." China does seem willing to let the RMB appreciate more," he said ,forecasting a "several hundred percent" gain in the currency over the nextfew decades. By contrast, Rogers said he is very pessimistic on the outlook for the U.S. dollar but still believes there will be a rally sometime very soon. He said that when that rally comes, he plans to sell the rest of his U.S. dollars. Despite the run up in commodities prices thus far, Rogers sees much more room to go. Most commodities are still well-below their all-time highs, he said, with sugar 80% below its all-time high and coffee 50% below its record. Growing global demand is putting pressure on supply and, unlike stocks, commodities are finite and take a long time to develop and bring to market. The last significant oil field was discovered 40 years ago, he said, adding that he expects oil to rise to US$180 a barrel or higher over the course of the commodities bull run, which could continue for 10 to 20 years. Crude oil for May delivery settled at $106.23 a barrel on Friday. Commodities are vulnerable to any sudden shock such as an unexpected war or Fannie Mae going under, but stocks are also vulnerable, he said. Rogers said that after the 9/11 attacks, commodities recovered much more quickly than stocks.

His views on the US markets are as follows:-

* Federal Reserve is causing its own downfall

* US consumers to face a long and painful economic malaise(similar to the lost decade in Japan in the 1990s or the 1970s stagflation in the US)

* Americans do not understand that they are facing an economic problem

* Although Federal Reserve is engineering a US economic rebound by creating an ultra weak dollar, no country in history has emerged from a financial crisis by "debasing its currency"

* Federal Reserves's mandate is to have a sound currency and employment.; not "bailout investment bank"

* Predicted gold to surge to US3,500 an ounce (when??)

* markets have not corrected yet

We will probably have to be patient to see whether this former hedge fund manager's predictions will come true or not. Will be revisiting this topic whenever some of the forecasts come near.