Pick China over India; oil likely to fall: Jim Rogers

The impact of Iran nuclear deal may not lead to new oil supply but it is clear that oil market is ready for a correction, said Jim Rogers, chairman of Rogers Holdings in an interview to CNBC-TV18.

Rogers said crude prices could see a bottom in the short-term, which in turn could galvanize OPEC into taking action. The OPEC so far hasn't cut back on their spending and would need to keep the prices up, he feels."We will probably hit some kind of bottom if we have panic selling; that usually means we are getting towards bottom and it looks like there is panic selling," he said.

Commenting on the aggressive reform steps taken by China, Rogers suggested buying stocks in China. He thinks the steps are positive for pharma and agri sectors. So, at presen he prefers China over India. He said: "The Chinese have said we are going to take dramatic action. I believe that usually when they say they are going to do something dramatic they do, they follow-through." 

Meanwhile, Rogers does not see any real end of QE until the market forces Fed to do so, although there could be temporary attempts at tapering. Rogers said: "The Japanese are not going stop. The Americans are not going to stop. The English are not going to stop. The Europeans have said we will do whatever it takes, so I do not see anything stopping this until eventually the market just says we are not going to take it anymore and then there will be a crisis and then the market may force them to stop."

 Also read: Outperformance over, time to book profits in metals: Nomura

Below is the verbatim transcript of his interview on CNBC-TV18

Q:  Iran’s nuclear deal is a historic deal. What impact do you see this having on crude prices in the near-term if at all?

A: It is already having an impact. Whether it is a real deal or not is irrelevant. It is having an impact right now. My first reaction is Iran has been selling its oil - they may not have been selling it to the west, but they have been selling their oil. So there is not going to be much of a new supply on the market, but psychologically it is clear that the oil markets are ready for a correction. This has given them an excuse for a correction and so it is in process.

We will probably hit some kind of bottom if we have panic selling; that usually means we are getting towards bottom and it looks like there is panic selling.

Q: You have always maintained that there is excess supply of oil right now. Do you think this could be the catalyst of a 6-7 month decline or a substantially long decline in crude prices?

A: You know I am not that smart, you know I am a terrible market timer, you know I am the world's worst short-term trader. You should watch your network - that is how you can find that whether this is six days or six years. I would suspect it is going to be short and sweet because the market will realise that while it is nice psychological threat, the reality is Iran has been selling most of its oil anyway to Chinese and the Russians.

Q: Do you expect that the Organization of Petroleum Exporting Countries (OPEC) will respond to any potential opening up of further supplies from Iran over the medium-term by a short-term cut in supplies. Saudi has been pumping out more crude than the OPEC likes it to, do you see the Saudi pulling back on supplies at all in the near-term?

A: Somewhere the OPEC will gather and say we have got to do something, because all of OPEC have not had great oil prices for a few years now. They have not cut back their spending and they are all spending a lot of money, so they need to keep the price up.

They would take some action or announce some action in an effort to get the price back, especially if it collapses some more and it looks like. You have many chartists at your network and it looks like it is going to have a nice little drop here for a while and that maybe the bottom that will galvanise OPEC into action.

Q: What has been happening in China with the reforms last week? What that might mean for base metal prices going forward?

A: I am excited by what happened. Chinese had an exciting announcement in 1978 and then in 1993, they said that this announcement is as significant and as exciting as what happened previously in those two years. So far what I have seen that corrects some sectors of the Chinese economy and as you all know if you can find a government that is going to spend a lot of money or give a lot of incentives to a sector you should put your money into that sector too.

So the Chinese are clear that they are going to do something about railroads, healthcare, agriculture, pollution. They have made it pretty clear they are going to do something, so I would suggest that people read what they have said and then try to find some stocks in those areas.

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Q: Where do you stand on dollar now? Amidst all these developments on what has happened globally where do you stand on dollar currently? In the past you have been bearish on dollar. Would that position stand?

A: At times I have been, though I have owned the dollar for a while now. Not that I am optimistic about the dollar - the dollar is a very flawed currency and there are serious long-term problems. But I expect more problems in the currency market and when that happens many people will flee to the US dollar as their safe haven. It is not a safe haven, but since people think it is they will go there and I own the US dollar at least at the moment.

I may own it for a week, a month, a year. I may sell it two years from now, I do not know, because it is definitely a problem of currency with serious problems long-term.

Q: You have been a critic of the US Fed's policies. Do you have now a timeline for when you expect the tapering or the normalisation of Fed policy to begin and what impact that will have on emerging markets like India?

A: Whatever happens, Miss Yellen is very keen on printing money. She was very much behind the scenes in this money printing. So she is not likely to stop. If and when they do start slowing down, the markets will probably go down a lot she will get scared, all of them will get scared, because they are bureaucrats, they are not very smart people. So they will get scared and start printing again.

The Japanese are not going stop. The Americans are not going to stop. The English are not going to stop. The Europeans have said we will do whatever it takes, so I do not see anything stopping this until eventually the market just says we are not going to take it anymore and then there will be a crisis and then the market may force them to stop.

I do not see any permanent or serious end of tapering until the market forces them to. There maybe temporary attempts at it, but these people are going to panic when things start dropping a lot.

Q: Are you buying anything in India? Is Indian stock market appealing to you?

A: No, I am still not buying anything in India. I would like to. I am still a critic and if your government would ever open up your financial markets, your currency then there might be people who would invest including me, but in the meantime I am looking at China and Russia right now.

What is happening in China as I have said, the Chinese market is down a lot from its all-time high. The Chinese have said we are going to take dramatic action. I believe that usually when they say they are going to do something dramatic they do, they follow-through.