China slowdown to hit India; EMs better bet than US: Faber

Below is the verbatim transcript of Marc Faber's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.

Latha: The Chinese latest Purchasing Managers' Index (PMI) data is to give heart attacks to the global markets every time those numbers come. Is China slowing more than the world is discounting? What are your own estimates?

A: Chinese growth has slowed down to maximum 4 percent. Now recent data would suggest that economic growth is even worse than 4 percent. If you look at the export performance and imports from Korea, Japan, Taiwan which are very reliable statistics. If you look at car sales in China, smart phone sales in China, all down, inventories are ballooning. So the data is fairly negative and this has also reflected in the performance of industrial commodity prices and then you have also essentially by huge credit bubble in China, a huge colossal credit bubble which will have to be deflated in my opinion.

Sonia: How do you see the reaction of the various asset markets and various equity markets here on? Is this the time to start picking bargains anywhere?

A: Personally I think that there are very few buying opportunities because although the market has gone down somewhat from the peak, they are nowhere near as low as they were in 2009 or 2003 or 1998. Most markets especially the US are still very pricy. So I do not think that we are at the buying opportunity yet and as an investor an important quality and strategy is patience; sometimes you have to wait until bargains emerge. There are some bargains in the world like gold mining shares, silver mining shares; precious metals are inexpensive compared to financial assets but aside from that not many markets are very depressed. Emerging markets are, in my opinion, more attractive than the US on a seven-ten years view but for the next six months we will still have rocky market.

However, what has surprised me essentially over the last 12 months is that - until the break came in August, the US market over 12 months period was basically flat and the S&P was down 2 percent year-to-date but as the market didn\\'t move the optimism kept on exploding on the upside and all these analysts and strategists and economists were all sleeping at the wheel because it was already obvious. One-and-a-half years ago the Chinese economy was slowing down very dramatically but these academics also that analysts and strategists and economists basically they were still dreaming that China was growing at 8 percent or 7.8 percent as the government was announcing because they do not even bother to analyse statistics. They just listen to what the government is telling them.

Latha: You said that there is a six month of volatility that you are seeing ahead - that is the time correction. How much of a price correction are you seeing for instance in the US indices?

A: In my view the US market; we were at the peak of 2,134. We are now down roughly 200 points. I wouldn\\'t be surprised if we went down another 200-500 points - that would not surprise me because the US is a Botox economy; they have always addressed the symptoms but not truly the problems of long-tem sustainable economic growth and it especially an overhyped financial market. Americans are very good at promotion and they overhyped their market. So as I told you, I think relatively speaking emerging markets are much better bargain than the US.

Sonia: Will you expect India also to move another 5-10 percent lower because of the global slowdown that we are seeing?

A: When it was close to 30,000 I mentioned to you that I expect it to drop to around 24,000-25,000 and it will be from a longer term perspective. However, it would be a mistake to assume that in an environment of global liquidity tightening, India would not be affected; it will also be affected. It will be affected from the Chinese economy, not because of its exports to China but when the Chinese economy weakens, it weakens all the resource producers of the world including Africa, Middle East, Central Asia, Latin America, Australasia and these countries, they buy all the goods and so when their economies go down, they buy less goods including less goods from India.

Latha: Tomorrow the central bank Governor Raghuram Rajan completes two years in office. How would you assess his performance as a monetary authority?

A: Different people have different views but in my opinion Rajan has done an outstanding job as a central banker. Let me explain why I am saying this, basically all over the world, central bankers have been printing money and this lifts asset prices and it leads also to rising wealth inequality.

We know very well from statistics in the US that over the last 10 years or so, but especially in the recovery after 2009, it was not even 1 percent that made a lot of money. It was 0.01 percent of the population, so, a very small part of the population. In the case of India, I would estimate that there are maybe 40-50 million shareholders on the population of 1.2 billion and of these there are only very few large shareholders, probably 10,000-20,000. Now, these people are all the ones that would like interest rates to come down and stocks to go up.

However, for the typical Indian, it doesn't matter whether the stock market comes up or down. For a typical Indian more important is price stability and currency stability. So, the way Rajan has conducted a monetary policy has benefitted the majority of Indians and not just the tiny minority.