‘India is black swan’

Andy Xie, a Shanghai-based independent economist, speaks during a seminar hosted by the Korea Institute of Finance (KIF) at the Lotte Hotel in downtown Seoul, Wednesday. (Photo : Courtesy of KIF)

A noted global economist said Wednesday that India and Australia are the two nations most vulnerable if their economic bubbles burst, forecasting that the global economy, particularly emerging countries, will further decline in the future.

Andy Xie, former chief economist at the Asia Pacific office of Morgan Stanley, pointed out that the solid performances of the two countries have been driven by bubbles, which he expects will burst in the near future.

“India is a black swan. It was just a hot money bubble. It’s not sustainable. How long can they do this? India is very dangerous,” said Xie in a seminar hosted by the Korea Institute of Finance at Lotte Hotel Seoull.

He said a lot of hot money flew into the country, creating the bubble there. But he argued the problem was that the money was not used to build infrastructure, which can sustain the economy. Due to the lack of industrial backbone, the country may face disasters in the future, he predicted.

He warned that investors should not be deceived by the high returns and capital in the nation because they will vanish without strong support from the industrial sector.

Xie’s other focus was Australia. He said the country will be in deep trouble next year due to its large property bubble.
“Property prices in Australia are twice that in the U.S., although Australia has a lower population. Do not put money in Australia. If you have money in Australia, pull it back while you can.”

The economist, who has earned a reputation for correctly predicting financial crises, also gave warnings about a lack of morality and other scandals in the banking sector. He said that people in the financial sector try to create illegal schemes to survive against cutthroat competition because there are too many people in the industry.

“It’s a people issue. Too many people are doing finance. They always want to do something. As long as so many people are working in the finance sector there will be no peace.”

Responding to a question regarding where to invest, he picked stocks of multinational companies, in particular, in the petrochemical, luxury brand and automobile industries.

“Multinational companies have been very strong. The reason is because the global stage allows them to shift very quickly. This platform is very valuable.”

He gave the example of a petrochemical company which can use natural gas to replace oil. In particular, he recommended Dow Chemical and Germany chemical companies that maintain handsome profits.

Luxury brands are also worth investing in, according to Xie, as they are very difficult to replicate. He said French brands are selling at forty times their original value, but it’s very difficult to see new companies which can compete with them. <The Korea Times/Kim Jae-won>

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