Next global rally may start in China, says Goldman’s O’Neill – ET

Posted on May 14, 2011 by

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Jim O’Neill, chairman of Goldman Sachs Asset Management , said investors should shed their pessimism and stop hoarding cash amid prospects for a global stock rally that could start in China .

The view that “the West is in trouble” is wrong when nations, including Germany, Sweden, Australia and Canada, are performing strongly, O’Neill said in an interview with Bloomberg Television in Hong Kong, recorded on Thursday and broadcast Friday. Investors should “stop worrying so much,” said O’Neill, known for coining the BRIC acronym for Brazil, Russia, India and China.

Global investors have tempered their optimism about the US and world economies and plan to put more of their money in cash and less in commodities over the next six months, a quarterly survey of Bloomberg subscribers showed. O’Neill, 54, said his strongest hunch is that China’s inflation may be close to easing, meaning the Chinese stock market may “go crazy” in the second half of the year. The central bank yesterday raised banks’ reserve requirements by half a percentage point to lock up cash that threatens to fuel gains in consumer prices.

In the aftermath of the 2008 financial crisis, investors are overly concerned at the possibility of so-called black swan events, said O’Neill, using a term sometimes used to describe unlikely occurrences with severe consequences. “Every little problem that crops up somewhere in the world is not going to create another black swan,” he said.

 
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