Editor and Publisher of The Gloom, Boom & Doom, Marc Faber says he sees a muted rally in the near term but added that the economic news would continue to be weak.
Faber said emerging markets (EMs) would rally another 20 per cent from hereon. "Commodity markets and EMs still look oversold to me," he said in an exclusive interview to CNBC-TV18.
CNBC-TV18: How crucial are this stimulus package that everyone is talking about and how durable an equity rally can it spark off across the world in your eyes?
Marc Faber: Basically globally many of the banks are pumping money into the system and we may have more of a rally in the near future. We have rallied quite considerably from the lows on November 21, so from here, the rally would be more muted.
CNBC-TV18: Another 10-15 per cent more or even less than that?
Marc Faber: That’s easily possible and I think emerging markets could rally somewhat more about 20 per cent. The economic news will stay poor and corporate profit in my opinion will not recover for quite sometime and I just don’t see any catalyst for global economy to grow again rapidly in the near future.
CNBC-TV18: What do you think would be the catalyst for this rally that we are talking about, is it this package that all markets are watching or is it just that the markets have remained ranged for a very long period of time?
Marc Faber: They fell very hard in November and the market became grossly oversold worldwide especially emerging markets and commodity markets, industrial commodities and I am not talking of gold which has held up well, but the commodity markets and the emerging markets are still very oversold. So as liquidity comes back into the system and we have some evidence that some liquidity aspects have improved like corporate bonds have rallied very significantly and corporate bond prices have diminished this could fuel a further rally.
CNBC-TV18: Some of the base metals have started seeing some rally in these past few weeks, is that a space you would want to look at even in terms of the pullback and riding that?
Marc Faber: Yes we have had some rebound in industrial commodities, Baltic Dry Index and also in mining related shares, for example some stocks were down to $21 but now they are back up to $40. So we have some very strong rebounds in the resource space and that’s why I am a little bit more cautious at the present time because the gravity of the rebound is already out of the market.
CNBC-TV18: China has been the best performer in the emerging markets in this part of the world in 2009 so far but India has been relatively okay, how you see these two markets doing relative to the rest of the basket and relative to each other in 2009?
Marc Faber: 2009 is a long time essentially another 10 months and many things can happen, for that I said the markets could rebound further in the near future and then at some stage, I guess when economic news would not improve very much, we are likely to retest the lows.
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