Magnate predicts 2-3 years boom in mainland markets
Warren Buffett said China's stock market will perform well in the next two to three years since the country's population had "found a way to unlock their potential."
The third-richest person in the world told the annual shareholders' meeting of Berkshire Hathaway in Omaha, Nebraska, on Saturday that China had taken much less time than the US to exert great influence on global GDP, adding that it is important for China and America to maintain close cooperative relations.
Buffett's comments came at a time when China's macroeconomic data shows promise. Although only four of China's 31 provincial regions have a higher GDP growth rate in the first quarter of 2015 compared to the same period last year, China's Purchasing Managers' Index figures in April have climbed above the 50 threshold for two consecutive months.
The comments also coincide with China's bullish markets. In April, the Shanghai Composite Index rose by 18.51 percent and climbed to a seven-year high of around 4,500 points.
Commenting on China's stock performance, Buffett said China's A-share markets will continue to perform well in the next two or three years.
Buffett's comments have inspired confidence in China's stock investors. An investor wrote on his Sina Weibo account on Sunday that whoever follows Buffett can get a big return.
But Jim Rogers, famed financial investor and CEO of Rogers Holdings, disagreed with Buffett, saying he was not sure if China's rising A-share markets will last two or three more years.
"A bubble may be developing," said Rogers in an e-mail to the Global Times on Sunday. He nevertheless stressed that he had bought more Chinese shares recently and was "likely to continue buying."
According to Rogers, A-shares do not provide the best buys. "The best buys are in other Chinese shares such as H-shares and American depository receipts (ADRs)." An ADR is a security of a non-US company that trades in US financial markets.
Buffett also highlighted the importance of value investing, an investment paradigm that calls on investors to focus on the intrinsic value of the companies in which they invest, as opposed to speculative investment.
Buffett said that value investing applied to all markets, including China's A-share markets. But he also pointed out that compared with the US market, China's investment environment is relatively young, and thus might be vulnerable to speculative influences, according to a report on ifeng.com on Sunday.
Cha Li, founding partner of iStart venture capital, said that it is very important, though a little difficult, for value investing to be learned and adopted by investors in China.
"In China, value investing means investing in companies that are product or service-driven, instead of those that hold monopoly resources as their core competitiveness," Cha told the Global Times on Sunday. "Only companies with a strong market value can help China's economic development."
But Cha added it is unlikely that value investing would become a common paradigm in China. "First of all, value investing requires patience. Many of the shares held by Buffett have been held for many years. In China, few investors would want to hold shares of a company for more than two or three years."
According to an interview by China Business Network (CBN) on the sidelines of the Saturday meeting, Buffett said he was glad that he invested in Petro China.
"We bought and sold that and we made $3.5 billion, I wish I could find another one over there," he told the CBN reporter. Talking about his investment in the Chinese carmaker BYD, Buffett said it is still unfolding, and "we feel very good about our investment."
When talking about China's economic development, Buffett reportedly said that it took only 40 years for China to exert great influence on global GDP, while the US took about 200 years.
"I would not have believed a country of that size could move so far, so fast," he said. "The country's population had found a way to unlock their potential."
Berkshire Hathaway's vice chairman Charles Munger echoed the praise for China, saying he is a big fan of what's going on in China, and he is optimistic about China's ongoing reforms and anti-corruption campaigns.
When asked about succession, Buffett said that a successor with hands-on experience is very important.