Hedgie Hendry forecasts Asian economic crash
HEDGE fund boss Hugh Hendry has warned the next phase of the economic crisis will hit Asia as China feels the impact of a property bubble and falling demand for exports.
The Scot (below), who runs Eclectica Asset Management, which has around $700m in assets, is known for his gloomy view of China but he said in his latest investor letter he was “more pessimistic on Chinese growth than ever”.
“This makes us bearish on most Asian stocks, bearish on industrial commodity prices, interested in some US stocks, a seller of high variance equities and deeply concerned that Japan could become the focal point of the next global leg down,” Hendry said in the April-dated letter
He cited Japanese group Hitachi as “too expensive” while buying five-year credit default swaps on Toshiba.
Hendry, who set up the Bayswater-based fund after leaving his job at Odey Asset Management, said some Japanese companies are “corporate zombies” which will sooner rather than later fall prey to over exposure to Chinese exports, high leverage and opaque and bloated balance sheets.
“It is hard to escape the impression that Japan’s blue-chip companies are teetering on the brink of extinction,” he wrote. Hendry has repeatedly warned that China has inflated a property bubble while allowing government debts to rise excessively. Three years ago he posted a video on YouTube showing empty skyscrapers in the city of Wuhan.
China will also struggle to maintain its export-supporting currency peg with the US dollar just as a slowdown in European growth hits demand for its goods, he said.
“It has long seemed to us to be the case that this economic crisis would start in the US and make its way to Europe. That has happened. However, we also think it will end in Asia.”
In his latest letter Hendry also said he was more bullish than most about US growth prospects, believing price restructuring in debt and labour markets as well as huge advances in shale oil extraction will maintain the economy’s position as the world’s largest.