Not everyone is sold on a rebound in Chinese stocks. According to Bloomberg this morning, Dr. Marc Faber, aka “Dr. Doom,” won’t be first in line to buy up these battered equities. Bloomberg’s Chua Kong Ho wrote:

Investors betting on a rebound in China’s tumbling stocks are setting themselves up for more losses, according to Marc Faber, who told investors to bail out of U.S. stocks before 1987’s so-called Black Monday crash and correctly predicted last August the U.S. would enter a bear market.

Faber’s forecast contrasts with local stock analysts, who are as bullish as ever even after a 51 percent plunge in the CSI 300 Index since its October record. “Buy” calls still make up two-thirds of all recommendations for Chinese stocks, virtually unchanged from the market’s peak, according to Bloomberg data.

Faber, who publishes the monthly investment newsletter The Gloom Boom & Doom Report, told Ho in an interview from Bangkok on July 4:

I just wouldn’t buy. When a bubble bursts, you only hit bottom when people totally give up and vow they’ll never buy stocks again. People are still more worried they’ll miss the next rally.

Ho noted:

The last time Chinese stocks fell by half — from a June 2001 high — the Shanghai Composite Index took four years to reach its low.

Even so, the Swiss-born investor admitted there could be a short-term bounce after such a huge decline:

We could have rebounds of 20 to 30 percent, but I wouldn’t bet on it. I would rather use rebounds as a selling opportunity.

Source:

“China Bulls Wrong; Stock Rout to Worsen, Says Faber” (Update2)
Chua Kong Ho
Bloomberg, July 7, 2008

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