The Fulcrum Asset Management Chairman says he is bullish about whether the world was going through a double dip recession or merely a soft patch, when quizzed at the GAIM 2011 in Monaco.
I am bullish; but thats because we are talking about it globally, said Gavyn Davies, Chairman at Fulcrum Asset Management and co-founder of Prisma Capital Partners. The developed world is going through a slowdown, which at the moment is generated by two temporary factors (well I hope are temporary). Firstly the Japanese earthquake and by the time we receive May and June data we should see a reversal, while secondly oil prices remain high at $115 per barrel (bbl) and anything above this, the developed world cannot sustain growth. However, my best guess is that this is temporary soft patch. Meanwhile, in the emerging markets there is no sign of a slowdown at all and I am not ready to call the top of the Chinese bubble yet.
When talking within the Bull/Bear Debate at the conference, Davies added his views on China and whether or not the economy is overheating.
While I am also bullish on China, one of the problems with the ascension Chinese economy is that it cant be assessed in the same way as the West, added Davies. The traditional output gap in West is hard to apply to China and unless there is an exact key metric is hard to say whether the Chinese economy is slowing down or merely becoming more controlled. For example, has it broken the speed limit and risen very quickly and therefore is the slowdown just a tightening of controls or an actual slowdown?
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(LB)