Marc Faber On India, Emerging Markets

Marc Faber, editor of the “Gloom, Boom & Doom” report, recently shared his outlook on India and other emerging markets in an interview with ET NOW. You can watch the full interview clip here.

Below are some highlights / takeaways:

  • Majority of emerging markets have meaningfully underperfomed the US market since 2011.
    • India, even after having “grossly outperformed” the US this year, is still lower than its peak a few years ago when measured in US dollar terms.
  • His view (for the last ~18 months) is that if he had money to invest with a 5-10 year time horizon, he would favour India and other emerging markets as they are more likely to outperform relative to the US market.
    • US is now ~54% of global market capitalisation versus relatively lower valuations in other emerging markets (he did imply, however, that country and sector selection was important).
  • He is also bullish on his outlook for markets in the Indochina region, which includes Cambodia, Laos, Myanmar and Vietnam.
  • Referenced a recent PWC study looking at the ongoing shift of economic power in the world:
    • The study concluded that India could overtake the US by 2050 to become the second largest economy in the world based on GDP in PPP terms.
    • Also predicted that Vietnam could be the world’s fastest growing large economy over the period to 2050, rising to 20th in the global GDP rankings by that date.
    • Those interested can find a link to that PWC report here.
  • Back to India, he touched upon areas where the India Capital Fund was finding opportunities although he stressed he is only a director there and not closely involved with the investment process.
    • The fund is overweight banks, but the other opportunity that is unfolding is domestic and international tourism – hotel chains, second homes and so on. If you can move people around efficiently, people will leave their homes in the city for the weekends. Thinks there is a big opportunity in real estate.
  • On economic policy, he applauds Raghuram Rajan for having resisted the temptation to print money. He said Rajan helped stabilise the Indian rupee, which is ultimately far more important than money printing and the stock market going up.
  • On commodities:
    • We had a huge bull market in commodities between 1999 and 2008; some commodities went up until 2011. From then, commodity prices declined sharply until end of 2015 / early 2016. Subsequently seen a strong rebound in prices as demand from China stabilised and then started to increase.
    • Says that you have to look at each commodity individually. For example, there is the expectation that the shift to electric cars will increase demand for copper. Also thinks agricultural commodity prices are relatively depressed.
    • Regardless of whether the global economy picks up or not, he believes commodity prices are at relatively low levels. Given the globally coordinated central bank policy of printing money, he would rather invest in commodity-related plays than financial assets.