Economist Jim Walker, managing director at Asianomics Ltd., says the euro may drop to 85 cents.
“I think people have misunderstood how difficult things are going to be in Europe for the next few years, not (just) the next few months,” Walker says.
“It’s going to get worse before it gets better … people are going to become much more risk-averse,” he told Bloomberg.
Early Monday, the euro fell as low as $1.1878 before pulling up to $1.1914 in early European trading — still below the $1.1956 it bought in New York on Friday.
Meanwhile, China’s got its own problems as well, Walker notes, especially since the country poured so much money into the economy during the past couple of years and now must look at cooling an overheated economy. The resulting slowdown will remove the premium from investing in China that had been in place for months.
Popular views notwithstanding, Walker is not at all sure that Europe has avoided “a Lehman type event.”
“Remember, in the Great Depression, it was an Austrian bank that went bad, not an American one. I think the potential is there for new problems in European banks.”
As to investing in Chinese companies, Walker says that easy credit and Beijing's stimulus measures are propping up armies of companies that, he feels, have dubious viability — and China’s current property boom will inevitably be followed by a bust.
Real estate in mainland China and Hong Kong retains a strong long-term allure despite current fears of a damaging bubble, according to Alastair Hughes, Asia-Pacific chief executive of Jones Lang LaSalle.
"For every expat who whinges about pollution, there are 20 people in London who'd like to be here," Hughes told AFP.
"I don't think you'd find many people who've made money betting against Hong Kong.”
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