NEW YORK (Reuters) - Hedge fund titan Ray Dalio said on Friday the Japanese economy will need another big round of stimulus to boost sluggish growth, and some emerging markets are on the path to crisis.
Dalio, chairman and chief investment officer of $150 billion firm Bridgewater Associates, one of the world’s largest hedge funds, was speaking at the Japan Society in midtown Manhattan.
In April the Bank of Japan pledged to inject about $1.4 trillion into its flagging economy in an effort to end two decades of stagnation. The monetary easing, coupled with reflationary, pro-growth policies championed by Japan’s Prime Minister Shinzo Abe, sent stocks rallying and the yen tumbling. Japan emerged from recession in 2012.
“The effects are going to wear off,” Dalio said, referring to prior stimulus measures. Japan’s central bank is “going to have to do another big round of purchases,” he said.
In a thirty-minute talk, Dalio addressed trouble in economies from China to France. He sounded a cautious note about investing in emerging markets, especially in equities, which have plunged in value this year. Emerging markets will not be an “an attractive place” to invest in the near future “given flows and pricing.”
He said emerging markets face “a major balance of payments problem” that will eventually lead to significant problems.
We are “going to have the emerging market crisis,” Dalio said during a question and answer period.
India should “prepare for the worst” since it has been one of the biggest beneficiaries of foreign capital flows that are already bypassing emerging market equities, he added.
As for Europe, Dalio said that France is of particular concern to him since “it has not dealt properly with debt to income ratios rising.”
Dalio is one of the $2.25 trillion hedge fund industry’s best known managers, known not only for his solid long-term returns but also for a unique culture at his Westport, Connecticut-based firm, where employees are encouraged to challenge each others’ and their bosses’ ideas publicly.
“I want no one in the audience to be polite with me,” Dalio said during the question and answer segment. “Let’s have a thoughtful disagreement.”
(Corrects location of firm in paragraph 10)
Reporting by Katya Wachtel, editing by Andrew Hay