Goldman's O'Neill sees buying chance in Russia, China

ST PETERSBURG, Russia Fri Jun 17, 2011 7:28am EDT

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ST PETERSBURG, Russia (Reuters) - Concerns about China and Russia are overblown and they offer investors a chance to buy into booming growth stories, Jim O'Neill, chairman of Goldman Sachs Asset Management, said on Friday.

"Contrary to the email I get every two hours about why I should drop the R from BRIC, I quite like Russia," O'Neill told Reuters Insider television in an interview at the St Petersburg International Economic Forum in Russia.

"I also like Chinese equities. As soon as we see the slightest sign of inflation starting to turn around, the markets will stop worrying about more tightening and then, highly controversial, I find myself thinking developed country financials are quite interesting," he said.

O'Neill declined to specify which banking stocks he liked, but did say the future of China -- and inflation in particular -- was the one issue that kept him awake at night.

"If this view that is growing, particularly in the (United) States, that China is already going down the hard landing path, that would be a big deal ... I think China is slowing because the authorities are deliberately trying to slow it," he said.

He said China, Russia, Brazil and India would collectively have economies bigger than the U.S. economy by the end of this decade and this would have a big impact on who runs financial institutions such as the International Monetary Fund.

He said he thought the slowdown in U.S. growth was temporary but, if it was not, investors should expect a third round of quantitative easing, or QE3 -- a term that describes treasury bond purchases by the central bank to stimulate the flow of credit and investment.

"I am a bit surprised and confused by the evidence that the U.S. has slowed so much. I still suspect it is only temporary and might have something to do with the Japanese supply disruption. If I am wrong then we will get QE3, though it might not be described that way," he said.

(Reporting by Guy Faulconbridge, editing by Timothy Heritage)

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