Emerging markets are a sell with the exception of China, said Jim Rogers, the chairman of New York-based Beeland Interests Inc.
“I’ve sold out of nearly all the emerging markets,” Rogers said “Right now, there are probably 10,000 young MBAs on aircrafts flying around from one emerging market to another, they’re all over-exploited, so I’ve sold out.”
The Morgan Stanley Capital International Emerging Markets Index (MSCI) has risen twice as fast as a measure of developed countries this year, as investors bet that sustained global economic growth and a surge in raw material prices will bolster profits. Shares in developing countries have outperformed since 2001.
The emerging markets index has jumped 17% in 2007, compared with the 8.2% gain in the MSCI World Index of developed economies. Benchmarks in markets including Brazil, China, India and Malaysia have all touched records this year.
“Valuations are not super-attractive as these markets have run up quite a lot,” said Christopher Wong, who helps manage $25 billion at Aberdeen Asset Management in Singapore. “If markets continue to go up like this, we do expect a correction.”
Bailing out: James Rogers, chairman of Beeland Interests Inc.
Rogers, who predicted the start of a commodities rally in 1999, didn’t identify which markets he had sold, or which assets. He also said he was bullish on agricultural commodities, gold, and water companies.
The International Monetary Fund (IMF) in April forecast that the world economy is expected to grow 4.9% this year, as expansion in developing nations helps to offset a slowdown in the US.
China, the world’s fastest growing major economy, is estimated to grow 10% this year, while India’s economy may expand 8.4%, the IMF said.
“The only one I didn’t sell was China,” said Rogers. “I don’t ever want to sell China, but if China doubles again this year, then it’s a full-fledged bubble and I’ll have to sell.”
China’s benchmark CSI 300 Index fell 4.2% last month, its first monthly decline since July 2006. Still, the index almost doubled in the first five months of this year, building on a 121% advance in 2006.
Those gains have helped make China the world’s most expensive major stock market. The CSI 300 is valued at about 41 times earnings, about twice as much as the MSCI Asia Pacific Index. The Standard & Poor’s 500 Index is worth 18 times earnings, while Europe’s Dow Jones Stoxx 600 Index is valued at about 15 times.
Still, concerns that emerging markets are overvalued may be slowing investors’ enthusiasm.
Glenys Sim in Singapore contributed to this story