1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
matsandalex
matsandalex
Articles (245) 

Is China Leading the Global Economy Down?

August 28, 2012 | About:

The macro demand picture out of China is rather gloomy. The question is whether the sharp drop in Chinese equities is a leading indicator of what might happen with the S&P and other major markets.

According to Bloomberg, profit at industrial companies continues to slide.

"Income dropped 5.4 percent last month from a year earlier to 366.8 billion yuan ($57.7 billion), the fourth straight decline, National Bureau of Statistics data today showed. That compares with a 1.7 percent slide in June and a 5.3 percent drop in May."

The Chinese stock market has plunged to 2009 lows. For example, the China 25 Index (FXI) is down 17% this year while most global markets are flat. However, the FXI is still 30% above its March 2009 low.

Furthermore, there are serious signs that commodity demand has slowed massively in recent months. Spot iron ore prices are down about 50% from last year. Coking coal prices are down about 55%.

Some noted short-sellers like Jim Chanos have been bearish on China and iron ore companies for over two years.

"The most outspoken Sino-Skeptic is Wall Street short-seller Jim Chanos, who over the past several years has placed negative bets on the stocks of major Chinese banks, real-estate developers, and mining concerns, like Australia’s Rio Tinto (ticker: RIO) and Brazil’s Vale (NYSE:VALE), which are major suppliers to the Chinese fixed-asset orgy. Never one to mince words, Chanos contends that China is headed for a hard landing of epic proportions because of its shaky financial system and an imminent collapse in its property market, which undergirds the entire economy. “I’m being conservative when I say that the coming bust in China’s real-estate market will be a thousand times that of Dubai,” he told Barron’s."

One of Chanos' bearish picks, Brazilian ore producer VALE, recently hit fresh 52-week lows.


Rating: 3.0/5 (3 votes)

Comments

Please leave your comment:


GuruFocus Mobile App


User Generated Screeners


TFCDebt Free Div Payer
KetsinyongEV
gericomROE
gjjbrownGarrys
AlainTecran 4
rjainCA
thanut7US GROWTH
thanut7THAI GROWTH
ravin707Ravin Screen 1
EMCMyscreen2

Select portfolio(s):

  • Loading...

Why you are interested?

Your selection and notes will be stored in your portfolio.

Login to add portfolio
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
FEEDBACK