Market declines driven by fear rather than reality, says Bank of Ireland investor Ross
Published 11/08/2011 | 05:00
BILLIONAIRE investor Wilbur Ross, who bought into Bank of Ireland recently, said this week he is also buying assets elsewhere as the global market declines are being driven by fear rather than economic reality.
There are plenty of assets one can buy today in emerging markets, including China and India, as well as Japan and Ireland which will prove attractive over the next several years, Mr Ross told Bloomberg Television on Tuesday.
He's backing companies in the marine petroleum transport and gas industries in the US.
Mr Ross joins Templeton Asset Management's Mark Mobius and Marc Faber, publisher of the Gloom, Boom & Doom report, who said they see opportunities in oversold markets.
"Has the world really gotten 10, 12, 15pc worse in the last 48 hours? I don't think so," Mr Ross said. "Buying stocks at today's prices over a couple of years' time period will prove to be a uniquely rewarding experience."
S&P's downgrade was "the right call" and "very courageous," Harvard University economist Kenneth Rogoff said in a separate interview.
Other rating companies are likely to follow suit in due time, Mr Rogoff said.
WL Ross, the company Mr Ross owns, specialises in reorganising distressed companies. Mr Ross (73) founded the New York-based company in 2000 after overseeing the bankruptcy practice at Rothschild. The firm has been looking at the companies it holds and that are available for trading, Mr Ross said.
"We bought some on Friday, we bought some more today; we will probably buy more when New York opens again. We've been pecking away as things decline."
Mr Mobius, executive chairman of Templeton's emerging markets group, said last week that equities in developing markets looked more attractive amid the turmoil in global markets. Gloom, Boom & Doom's Mr Faber said earlier this week that the stock markets were "incredibly oversold" and were "likely to bottom out".
"Forced involuntary selling" by investors who faced margin calls from banks after the value of the stocks they held declined sharply had contributed to market losses, Mr Ross said.
There was "a good probability" that the US Federal Reserve would institute another round of quantitative easing policies to stimulate the economy as oil prices had fallen and unemployment remained high, Mr Ross said.
The Fed was expected to act "more decisively" to stabilise the economy, Mr Rogoff said. A new round of easing policies should come with clear statements that they're trying to create moderate inflation, instead of propping up the stock market, he added.
Single-B-rated junk bonds performed worse than stocks earlier in the week, Mr Ross said. The risk-averse phenomenon usually indicated investors were getting close to "the point of capitulation" and things could get back to being more normal after that, he said.
Mr Ross said he liked Ireland as the investment community had misclassified the country, which did not need structural reform only needing to repay debt incurred during its banking crisis.
China's property market was not headed for a crash akin to the US because of a shortage for housing, low loan-to-value ratio and families' willingness to step in to help repay mortgages, he said. A bigger test for the Government would be its ability to contain rising food costs, which account for a large percentage of household budgets in the low-per-capita-income economy, he added.