China May Crash in Next 12 Months-Faber
Source: Investment News (5/6/10)
". . .declines in commodity prices signal [China's] property bubble is set to burst."
The Shanghai Composite Index has failed to regain its 2009 high while industrial commodities and shares of Australian resource exporters are acting "heavy," Faber said. The opening of the World Expo in Shanghai last week is "not a particularly good omen," he said, citing a property bust and depression that followed the 1873 World Exhibition in Vienna.
"The market is telling you that something is not quite right," Faber, the publisher of the Gloom, Boom & Doom report, said in a Bloomberg Television interview in Hong Kong today. "The Chinese economy is going to slow down regardless. It is more likely that we will even have a crash sometime in the next 9–12 months."
An index tracking Chinese stocks traded in Hong Kong dropped 1.8% today, the most in two weeks, after the central bank raised reserve requirements for the third time this year. The Shanghai Composite has slumped 12% this year, Asia's worst performer, as policymakers seek to rein in a lending boom that's spurred record gains in property prices. China's markets are shut for a holiday today.
Copper touched a seven-week low and BHP Billiton Ltd., the world's biggest mining company, fell the most since February on concern spending in the world's third-largest economy will slow and after Australia boosted taxes on commodities producers. Rio Tinto Ltd., the third-largest, slid as much as 6%.
The nation's economy grew 11.9% in the first quarter, the fastest pace in almost three years. The government projects gross domestic product growth for the year of about 8%.
The clampdown on property speculation may prompt investors to turn to the nation's stock market, Faber said. Still, shares are "fully priced" and Chinese investors may instead become "big buyers" of gold, he said.