Hedge Fund Manager Betting Soros is Wrong about China
New York: Bob Bishop, who once ran investments for billionaire George Soros, is betting his former boss is wrong about China. The world’s second-biggest economy has had its hard landing and is on its way up, according to Bishop. Rising infrastructure spending, steel production and demand for metal and heavy-duty trucks are signs of improvement for the nation’s industrial and manufacturing sectors, said Bishop, a former chief investment officer at Soros Fund Management who runs $2.2 billion hedge fund Impala Asset Management. Soros said last week that China resembles the US in 2007-08, when credit markets froze and triggered a global recession, and that its banking system is increasingly unstable.
“China already had the crash,” Bishop said in an April 18 interview. “It bottomed at the end of 2015. It’s going to feel like a much better economy in China over the next two years than people seem to think it will be.”
Policy makers in China talked up growth and added stimulus this year to re-energise the economy. In March, the purchasing managers index ticked above 50, signaling expanding factory activity for the first time since June. A recovering China, which is a key importer of steel, copper, iron ore and other metals, bodes well for commodity prices. The price of iron ore rose more than 50% this year as of Monday and copper was up almost 6%.
If copper reaches $3.25 a pound, which Bishop expects will occur
BETTER DAYS AHEAD Policy makers in China talked up growth and added stimulus this year to re-energise the economy. In March, the purchasing managers index ticked above 50
in 2017, Freeport-McMoRan, the largest publicly traded copper miner, could see its earnings triple and stock price jump by $3 to $4 a share, he said. The stock closed Monday at $11.35 in New York. Impala initiated a “modest” investment in the stock in the past month and a half, according to Bishop. It also took a position in miner First Quantum Minerals. The firm has boosted its investments in commodity stocks to about 20% of the Impala Fund from 4% at the start of this year, Bishop said. “What people often miss on commodity stocks is that their earnings leverage and stock sensitivity to price movements in the underlying commodity is very high, more so than any other sectors in the market,” Bishop said.
The S&P’s Global Natural Resources Net Total Return Index has rebounded almost 40% since January 20, its low point this year, after a slide that began in mid-2014 as China’s economic growth slowed. Bishop, who worked at Soros between 2002 and 2003, started New Canaan, Impala in 2004. Its main equity fund, which manages about $1.5 billion, gained 7.7% in March, bringing returns for the year to 2%. Bishop declined to comment on performance or on Soros’s views. — Bloomberg
Hema Parmar & Saijel Kishan