Gurus Place China Bets

As the mainland market continues its bull run, two heavyweights in the world of investing have expressed contrasting views about where they may unlock potential value in the country.

Commodities guru Jim Rogers declared yesterday he is pulling out of all his US dollar assets and buying the yuan. Billionaire Warren Buffett, meanwhile, warned of overstretched valuations of mainland stocks - and urged investors not to lose their shirts.

Rogers, who has consistently been bearish on the US dollar, said the yuan is the best currency to buy, predicting the value of the currency to quadruple in the next decade.

"I don't see how one can really lose on the [yuan] in the next decade or so. It's gotta go. It's gotta triple. It's gotta quadruple," he was quoted by Bloomberg as saying during a presentation in Amsterdam late yesterday.

The yuan yesterday broke through the psychologically important level of 7.5 to the greenback for the first time. It closed at 7.4926, up from Tuesday's close of 7.5047.

Reiterating his bearish view on the US dollar, Rogers said the value of the greenback will further erode.

"I am in the process of - I hope in the next few months - getting all of my assets out of US dollars.

"I am that pessimistic about what's happening in the US," said the chairman of Beeland Interests and former partner of George Soros.

The US dollar has fallen against major currencies as concern mounts over economic growth in the United States, while last month's 50-basis point interest rate cut has prompted investors to dump US dollar assets.

Meanwhile, billionaire Buffett said although the fundamentals of the mainland economy remains positive, investors should be "cautious about mainland stocks as the market is too hot.

But last week, after his investment vehicle offloaded shares in PetroChina (0857), he noted it was "too soon to have sold the entire stake as the shares had risen since.

"We never buy stocks when we see prices soaring, Buffett told Bloomberg in Dalian, where he was visiting a subsidiary of a company held through Berkshire Hathaway. "We buy stocks because we're confident of the company's growth. People should be cautious when they see prices rising."

The world's second wealthiest man said he was looking elsewhere in Asia to buy large businesses that he understands, but that he was doubtful of finding a good buy in the mainland now that the benchmark index has more than doubled this year.

"If you understand a business and buy at a reasonable price, there's no risk.We've never realized a loss because we understand the businesses that we buy in," he said.

He denied media reports that Berkshire will invest in China Life Insurance (2628).

The CSI 300 index, which tracks major mainland-listed stocks, has jumped more than 170 percent this year. It gained 0.87 percent to close at 5,588.01 yesterday. The Shanghai Composite Index rose 1.21 percent to 5,843.11.

Meanwhile, Buffett, 77, said he was "appreciative of the performance of PetroChina."

Buying PetroChina had been "an easy decision, he said, but he doubted if he can find "another PetroChina, given the high valuation of mainland listed companies."

2008-03-17

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