|New Threads Only:|
|New Threads & Replies:|
Forum List » Guru News and Commentaries|
Guru News, Stock picks and commentaries
China’s GDP: A High-Quality Problem
Posted by: Charles Sizemore (IP Logged)
Date: October 19, 2012 10:58AM
China has what I like to call a “high quality problem.” The Chinese economy grew by 7.4 percent in the third quarter. This was the country’s worst quarter since early 2009, but it was in line with market expectations.
Only in China would 7.4% growth constitute a severe slowdown. I don’t have to tell you that this is far above the growth rates of any other country of any real size. China may not be growing like it used to, but it’s still the best show in town among major world markets.
Sentiment on China remains awful—just this past week, Coca-Cola (KO) joined the long list of Western firms blaming lackluster growth on the Chinese slowdown—but the data is mixed and showing signs of life. Releases o n fixed asset investment, retail sales and industrial output all beat expectations.
All of this rotten sentiment has translated into some pretty horrendous stock returns for Chinese investors. Chinese stocks have been in almost continuous decline for the past two years—at least up until last month.
I recommend investors take a look at the iShares FTSE China 25 Index ETF (FXI). I like what I see here. Chinese stocks appear to be starting a new uptrend, even while sentiment towards them remains terrible.
If the Chinese economy maybe—just maybe—doesn’t end up being as sick as everyone seems to think it is and we see some signs of life in the next few months, sentiment can shift if a hurry. And when it does, I expect FXI to enjoy a quick boost.
7.4% growth in a slow-growth world isn’t half bad, and eventually investors will reach the same conclusion. In the meantime, we’re getting access to an index that trades at 8 times earnings and yields 2.7% in dividends. Not too shabby indeed.
Stocks Discussed: KO, FXI,
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC. Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.