George Soro's views on market outlook for U.S. and Asia

[Dennis Ng]

A forumer by the name of Governor met George Soros in person together with guests of 120 people at an events organise by Singapore Institute of International Affairs on 9 Jan 2006. The following is what Governor wrote on what he learned from George Soros:

I find Mr Soros a funny and easy going person given his status as one of the greatest investment guru the world have ever witness. Mr Soros touched on a broad base of subjects.It include Economy, Social, Politic and outlook for Asia.Below is a summary of the talk.

He mention about US going in recession in 2007 as the housing boom come to any end.He expect the Fed to over shoot on the tightening cycle of interest rate.He predict that the end of the housing bubble will hurt consumer demand.Previously the strong consumer demand was fuel by rising home price which more or less offset the effort of higher oil price.In my personal view he seem to be pessimistic on the outlook in US.He also predict a slow down in China and Asia if US will to go into recession as most Asian economy are driven by US demand for consumer goods.

He also touch on politic issue,he believe Mr George W Bush had mislead the general public on the war on terror.He said the war on terror is not going to solve the problem on extremism.

He believe oulook for Asia is great over the long term.He did mention on investing in Chinese company where they are very attactive.He see great potential in good Chinese company where interest of the management can align with the shareholders.

He is also quite concern with global warming and urges China/US to do more to stop green house gas.



Soros: China is making my mouth water
It reminds him of underdeveloped markets in which he did very well

(SINGAPORE) Legendary hedge fund manager George Soros is salivating over China. The country 'reminded me of the kind of underdeveloped financial markets in which I used to do very well,' he told some of Singapore's top brains in the finance industry yesterday. 'It makes my mouth water.'

According to him, China is in a situation where share prices generally still do not reflect companies' values. This undervaluation arises from the lack of alignment between the interests of management and shareholders.

'When this is corrected, there will be big opportunities,' he said, adding that he is seeing the beginning of the alignment of interests.

One concern for Mr Soros is the lack of freedom of expression in China. 'The leadership in China became nervous after the (pro-democracy) 'colour revolutions' in the ex-Soviet countries, and they have clamped down on freedom of expression,' he said.

Mr Soros stressed that prosperity and an open society - which he staunchly advocates - have a symbiotic relationship. China, he said, should take the relative prosperity that it is enjoying now and open up to allow for more diversity of opinion.

'Excessive reliance on markets - that's the flaw in the globalisation that we currently have. And that needs to be recognised.'

- Mr Soros

'When a serious problems develops, a society without freedom of expression can't cope,' he said, citing the example of Indonesia, which went through a much more difficult time than its neighbours after the Asian financial crisis. 'And some kind of crisis will develop in China,' he said.

On the economic front, Mr Soros sees the US economy cooling down in 2007 as the housing bubble deflates. Interest rate rises will stop, and the US dollar is likely to fall. And if China continues to tie its currency to the US dollar and does not permit it to appreciate, a bigger pressure will be created elsewhere.

Meanwhile, the slowing of the US economy will fan protectionist sentiment, and if Beijing doesn't bend to the demands of Washington, there will be disruptions, he warned.

Mr Soros, who is on a four-day visit to Singapore, was addressing the audience who showed up for a dialogue session with him at an event organised by the Singapore Institute of International Affairs (SIIA).

Mr Soros thinks that Singapore is ready for a more lively political scene after the tremendous material progress made in the last 20 years. 'That would be perfect, but as I mentioned before, perfection is not attainable,' he said.

There is no such thing as a perfect market because a precondition of that is perfect information, said Mr Soros. And perfect information is not attainable.

Despite having profited tremendously from capitalism, Mr Soros also sees the necessity of government intervention.

'When left to its own devices, financial markets go to the extremes of booms and busts. We need the authorities to prevent the excesses from going too far, to intervene early before a boom gets out of hand and becomes a bubble,' he said.

Markets are good at taking care of private needs, but not the collective social needs of the world such as world peace and social justice. 'Excessive reliance on markets - that's the flaw in the globalisation that we currently have. And that needs to be recognised.'

When asked by Simon Tay, chairman of SIIA, why he didn't want George W Bush re-elected as US president, Mr Soros said he felt Mr Bush was leading the US astray.

'Where the US went astray was in declaring war on terror,' he said. Terrorism claims innocent victims for political reasons. In dealing with terrorism, the world should avoid doing the same thing. But by waging war on terrorism, the US is bound to hit innocent people.

'That's the vicious circle we are currently caught in,' Mr Soros said.