Laurence D Fink, who runs the world’s largest asset manager, said the recent stock market decline presents a buying opportunity because markets are poised to gain over the course of the next year.
BlackRock’s Laurence Fink sees buying opportunity
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“You can’t walk away from these movements,” Fink, chief executive officer of BlackRock, said Friday in an interview from the World Economic Forum in Davos. “Use these as an opportunity.”
Fink said while markets have currently capitulated amid slumping oil and inconsistent messages coming from China, he doesn’t expect a bear market in equities. BlackRock, which oversees $US4.6 trillion for clients, saw institutional investors starting to come back into markets on Wednesday, when US stocks briefly fell as much as 3.7 per cent before recovering most of the losses.
Top investors such as George Soros and Jeffrey Gundlach have advised investors to use short-term market rebounds to sell assets. Soros said Thursday that China’s economy is headed for a hard landing, a slump that will worsen global deflationary pressures, drag down stocks and boost US government bonds. Other investment managers, including Guggenheim Partners’ Scott Minerd and Bridgewater Associates’ Ray Dalio, have warned that the market likely has further to fall.
Soros, who shorted the Standard & Poor’s 500 Index, said it is still too early to buy equities, while Gundlach said he expects a “protracted decline in the S&P 500”. Dalio cautioned that global markets face risks to the downside as economies near the end of a long-term debt cycle.
The warnings come as oil prices have plunged and China’s growth has slowed.
“What China struggles with is an immature capital market that is heavily dependent on leverage retail,”
Fink said China needs to expand its international markets faster and allow more foreign investors, which would create a more stable, less volatile market, he said. “What China struggles with is an immature capital market that is heavily dependent on leverage retail,” he said.
Fink said it would “be horrible” if China devalues its currency because it would have a huge global deflationary impact and would mean the country is moving back to an export-driven economy.
His views diverge from others, including hedge fund manager Mark Hart and Goldman Sachs Group president Gary Cohn. Hart, who is betting against the yuan, said China should weaken its currency by more than 50 per cent this year. A one-off devaluation would ease pressure on China’s foreign exchange reserves and remove an incentive for capital outflows, he said. Cohn said that China will likely have to devalue its currency in the next six months to address slowing growth.
Questions & Answers
Q.What is Laurence Fink's assessment of the current market decline?
What is Laurence Fink's assessment of the current market decline?
A.
Laurence Fink believes the recent stock market decline is a buying opportunity, expecting markets to gain over the next year. He does not anticipate a bear market, despite current capitulation amid slumping oil prices and inconsistent messages from China.
Q.Which other prominent investors hold a different view to Laurence Fink regarding the market outlook?
Which other prominent investors hold a different view to Laurence Fink regarding the market outlook?
A.
George Soros, Jeffrey Gundlach, Scott Minerd, and Ray Dalio hold differing views. Soros and Gundlach advise selling during rebounds, with Soros predicting a hard landing for China's economy. Minerd and Dalio warn of further market falls.
Q.What is Laurence Fink's advice for China's capital markets?
What is Laurence Fink's advice for China's capital markets?
A.
Fink suggests China needs to expand its international markets faster and allow more foreign investors. This would create a more stable, less volatile market, addressing its immature capital market heavily dependent on used retail.
Q.What are the contrasting views on China's currency devaluation?
What are the contrasting views on China's currency devaluation?
A.
Fink believes a devaluation would be 'horrible', causing global deflation and a return to an export-driven economy. However, Mark Hart and Gary Cohn think China should or will likely devalue its currency to address slowing growth and ease pressure on reserves.