Saturday, November 9, 2013

China Pessimism Bubble: Don`t Believe The Crash Callers

(Drivebycuriosity) -  Don`t Believe The China Crash Callers. China`s economy is doing well, thanks. This morning we get more encouraging news from the eastern nation (marketwatch):  Industrial production rose 10.3% year over year in October, beating expectations and September’s 10.2% rate, retail sales grew 13.3% year over year in October, in line with September. This week we also learned that China´s exports advanced rose 5.6% and imports advanced 7.6% (bloomberg). Those numbers also were better than in the month before.

All these data prove that China´s economy is growing steadily and may even accelerate its advance. The numbers also confute the notorious China crash callers. For years China bashers like New York Times correspondent Paul Krugman and Jim Chanos, a hedge fund manager and notorious short seller, have been banging the "China crash drum"  (driveby). Recently JP Morgan joined the crowd of China bears and cut China to underweight. According to the China crash callers, China is suffering from huge structural problems like too high debts and too huge investments into real estate which would cause a "hard landing" of the Chinese economy. They all are focusing on some structural problems and ignoring the ongoing strength of the broad economy.

The stock market is still trapped in a pessimism bubble created by the China bashers because many investors, especially the crowd of fund managers, believe them. This week the Shanghai Composite Index, which represents the Chinese stock market, dropped around  2% and is down 7% year to date.

I think that the flow of good numbers will continue, because China´s economy is getting strength. This  could stick pinpricks into the pessimism bubble and led it finally pop giving way to a significant rally.

No comments:

Post a Comment