What is your growth outlook for Southeast Asia?

FABER: Today, all emerging economies depend very much on China. In the early stages of industrialization, when a country like China has 1.3bn people, they demand a lot of resources. As a result of this increase in the need for resources, prices after 1999 went up and that stimulated the resource producers of the world, whether they are in Latin America, Africa, Central Asia, Russia, Middle East, or in the Asian region including countries like Malaysia, Thailand, Indonesia, or Australasia. The increase in Chinese GDP over the last 12 years, which has run at plus or minus 10% per annum, drove the economies of Southeast Asia favorably. Now, in my view the Chinese economy is slowing down far more than the public statistics would suggest. If Chinese growth goes from say, trend-line, 10% per annum, to what I think is more realistically 4% or 5% per annum, then it has an impact on resource prices and commodity prices and it has an impact on the economic growth rates of countries like Indonesia, Malaysia, and also countries like Brazil and Australasia. So as the Chinese demand slows down, it affects these countries, and in turn, they buy less goods from China, and you have a downward spiral in trade. In my view, the emerging markets are actually quite vulnerable to a slowdown in China. In countries that publish relatively honest statistics, we see a meaningful slowdown in economic activity. It is not that Asia is presently having a recession, it is just that many countries are no longer growing. There is a high level of economic activity, but they are not really growing.

What is your economic outlook for Malaysia?

FABER: Actually, a few years ago, hardly any foreigners were interested in Malaysia and I started to invest. It has been a very favorable investment. First of all, the dividends on Malaysian stocks, even after the increase in the market, are relatively high. As a country, I find it reasonably well balanced, in other words they have different sectors, they have industries, and they have resources. Unlike, say Indonesia, the population is relatively small compared to the land mass. The banking sector is actually also relatively strong. So I still hold my Malaysian shares and I have a reasonably favorable outlook for the economy of Malaysia.

What is your economic outlook for Thailand?

FABER: In the last few years, the Thai economy has done fine. From the lows in 2009 until the recent highs, the market was up 4 times. I have written about this not long ago. In my view, there was excessive speculation. That does not only apply to Thailand but to other countries as well. Over the years, from 2000 to today, there has been meaningful credit growth. Especially following the financial crisis in 2009, governments pursued expansionary fiscal and monetary policies and so credit growth was very strong. Whenever household debts go up faster than the economy, or as household debts as a percentage of the economy increase, it will signal a period of more pronounced slowdown afterwards because you cannot increase household debts indefinitely as we have seen in countries like the US and also in Australia and Canada and so forth. So my view is that the Thai economy has done well and the financial market has done well. I can see the theme in the Indo-Chinese region, in the East there is Vietnam, Laos in the North, Cambodia in the South, Thailand in the Middle and in the West Myanmar, India, Bangladesh. This whole region will be linked with transportation and also with trade links, including China in the North, Yunnan province, and in the South, Malaysia and Singapore. So the economic growth rates will be fine. But we have to see that, at the present time, there have been significant cost of living increases in Thailand. The household debt level is high, and there was a consumption boom. If you look at household statistics of Singapore and Thailand. In the case of Singapore, GDP contracted in the 4th quarter of 2012 and is now flat. In the case of Thailand, year on year, there has still been some growth. But from the 4th quarter of 2012 to present time, GDP is down and industrial production is down. I think we are not in a recession in Thailand, but we have no growth at the present time.

The other point that I would like to make about Thailand is that we have heavy intervention by the government in the economy. Some people would call this crony capitalism. I think this will not end very well. Now the stock market having gone up so much, including in Indonesia and the Philippines, is not particularly attractive. I still have investments in Thailand because some companies have high dividend yields, so compared to the bond yields I think it is ok. But I think the market will go lower.