Biggs Says World Stocks Will Gain as Economies Grow

(Bloomberg) -- The six-month rally in global stocks isn’t over yet, with emerging markets poised to lead the world higher, investor Barton Biggs said. Financial conditions are the best since before the collapse of Lehman Brothers Holdings Inc., said Biggs, who runs New York- based hedge fund Traxis Partners LP. Chinese shares traded in Hong Kong are cheap compared with earnings, he said.

The MSCI World Index has climbed 59 percent since a 13-year low on March 9 on signs economies are recovering from the first global recession since World War II. The Bloomberg U.S. Financial Conditions Index, which tracks how far bonds, stocks and options prices stray from their mean levels, reached its best level since Oct. 31, 2007, on Aug. 7.

“The U.S. economy and world economy are clearly emerging from the recession,” Biggs, the chief global strategist for Morgan Stanley until 2003, said in an interview with Bloomberg Television. “The pace of acceleration is not totally clear yet, but I suspect it will be better than the consensus expects.”

The retreat this month in the Shanghai Composite Index of China’s yuan-denominated ‘A’ shares “does look like a healthy correction to me rather than the end of a big move,” Biggs said. The measure soared 91 percent this year to a 15-month high on Aug. 4 before paring its advance by 18 percent.

‘H’ Shares
The Hang Seng China Enterprises Index, a gauge of Chinese “H” shares trading in Hong Kong, climbed 19 percent through July 28 after Biggs recommended investing in the companies on May 29. That’s almost three times the advance in the S&P 500. They then retreated 8 percent. Companies in the Hang Seng China Enterprises Index trade for 19.3 times the operating earnings of its companies from the past year, 37 percent cheaper than those in the Shanghai Composite Index.

In a Nov. 6 interview, Biggs said the S&P 500 had probably reached its bear market low and estimated it would rally 15 percent to 1,100. The index tumbled 21 percent in the following two weeks to an 11-year low. On Feb. 18, with the measure down 13 percent for the year, Biggs said stocks were poised to rise. While the index dropped 14 percent in the following two weeks, his comments presaged a 40 percent rise from March 9 through June 12, the steepest since the 1930s.