Marc Faber Says Asian Currencies, Crops Among World's Best Buys
May 23 (Bloomberg) -- Malaysia's ringgit and the Singapore dollar may give investors the biggest returns among Asian currencies because a U.S. slowdown may prompt the Federal Reserve to slow or stop its interest rate increases, Marc Faber said.
Faber, who oversees about $300 million as managing director of Hong Kong-based Marc Faber Ltd., recommends selling the euro to buy the ringgit or the Singapore dollar because they haven't appreciated and are therefore more undervalued.
Once the U.S. economy deteriorates, the Fed ``will go back to the old medicine, which is essentially to print money and the dollar will weaken again,'' Faber said in an interview with Bloomberg News today. ``Compared with the euro, the Asian currencies are very, very inexpensive.''
The ringgit, pegged at 3.8 to the dollar seven years ago to stem a capital flight, has tracked the dollar's 30 percent drop against the euro since the start of 2002. The Singapore dollar, which is linked to a basket of currencies, has weakened 12 percent versus the U.S. dollar in the same time.
Faber, 59, is the author of The Gloom, Boom & Doom Report, and has invested in Asia since 1973. He gained notoriety for being bearish on Asian assets before the Asian financial crisis in 1997 caused markets in the region, including those in Malaysia and South Korea, to collapse.
Bullish
Now, Faber is bullish on Asian currencies because of his view a surge in U.S. property prices, which has underpinned growth in consumer spending there, will stall and precipitate a slowdown in the world's largest economy. That will result in the Fed lowering borrowing costs and result in a weaker dollar.
``The foreign exchange market will anticipate this easing beforehand'' resulting in a drop in the dollar, said Faber, adding that he was a ``reluctant'' holder of dollars.
Some investors and traders disagree. Fifty-nine percent of the 54 strategists, investors and traders surveyed globally on May 20 said the dollar is poised for its longest winning streak against the euro since 2000 on expectations the U.S. currency's three-year bear market has ended.
Fed Chairman Alan Greenspan said on May 20 that some regions of the U.S. housing market are showing signs of unsustainable price speculation and ``froth'' from rapid sales.
Greenspan also said there is a risk that consumer spending in the U.S. may decline if the housing market slows. The median selling price of a previously owned home rose to a record $195,000 in March, according to the latest statistics from the National Association of Realtors.
``The moment housing fails to increase to value or declines, household net worth will go down and contain spending,'' said Faber.
Loosening the Peg
He also favors the ringgit because speculation that China will loosen its currency peg may pressure Malaysia to follow suit and let its own currency to trade more freely.
Foreign investors have purchased $7.9 billion (30 billion ringgit) worth of ringgit-denominated assets, betting Malaysia will let their currency appreciate, according to an estimate by Standard Chartered Bank.
Faber is also betting on gold because it has become cheaper compared with commodities such as crude oil.
Today, one ounce of gold, trading at $417.60, is worth about eight barrels of oil, according to Faber. In 1998, when oil fell to less than $11 per barrel, gold was trading at about $285 an ounce. That's equal to about 26 barrels of oil per ounce of gold.
``You should be long gold and short oil,'' Faber said. Commodity markets ``aren't particularly attractive.''
Drought
The exceptions are agricultural commodities including wheat, corn and soybeans, which may ``easily double'' in price as demand from China increases as urbanization and global warming reduces annual harvests, Faber said.
Drought is harming 12 million hectares (30 million acres) of China's farmland, affecting spring sowing of the country's rice crop and the final growth stage for winter wheat, the China Daily reported in April, citing government data.
The price of wheat today is $3.17 per bushel, 20 percent higher than in December 1998, when oil fell below $11 per barrel. Oil prices have increased more than fourfold in the same time.
Soybean prices may climb for a second week on speculation drought-like weather in Mississippi will spread to Midwest states, threatening crops in the biggest U.S. growing region.
Thirteen of 17 farm advisers, grain merchants and traders surveyed May 20 recommended buying soybeans, which had the biggest weekly gain in 10 last week. Prices are up 25 percent from a 31-month low on Feb. 4, as drought damaged soybeans in Brazil, the second-largest grower after the U.S.
``Agricultural commodities have never been as inexpensive as right now. You will have more droughts, more flooding and more natural disasters'' causing harvests to fall and prices to rise, he said. In China, farming ``acreage is declining due to urbanization. In the long run, China will also be a stronger buyer of all agricultural commodities.''
Rogue
