3 REASONS TO BUY CHINA ON DIPS
JP Morgan says investors should buy Chinese equities on any dips. They believe the economy has bottomed and that the environment will remain conducive to economic growth:
(1) China’s real GDP growth, on a sequential basis, may have bottomed out at 7.2% QoQ in 2Q10. Yet we believe China’s final demand growth will not bottom out until late FY10, because the modest sequential rebound in GDP in 3Q should be driven by a slowdown in de-stocking and the widening of the trade surplus on sharply falling imports, rather than by a decent recovery in final demand;
(2) improving liquidity conditions – (a) China’s M2 growth (which tends to lead H-shares performance), on sequential terms, is expected to bottom out, with trend growth reaching a trough of 11.8% 3m/3m, saar in September before rising to 16.8% in December; (b) we estimate new loans made by Chinese banks in 2H10 will reach around Rmb3 trillion, up 37% YoY;
(3) we believe the worst of the policy tightening environment may be behind us.”
Source: JP Morgan
Don’t worry about the 64 million vacant residences.
JP Morgan must be vying for some business in China – a country where 83% or little over a billion people live with income less than $2,000.
Some sober data on China for investor (speculators) fascinated with China – 3rd world country ruled by 1 party – communist. Similar to the adoration US had for Japan 20 yrs ago right before the mother of all Japanese bear markets starting in 1989.
China would have to triple the size of its economy – and the US would have to stand still – if China were to pull even with the US in GDP.
Consider the following numbers, culled from official Chinese statistics:
1. About 65 million or 5% Chinese people live in households with more than $20,000 a year in income.
2. Around 165 million or 13% make between $2,000 and $20,000 a year.
3. About 400 million or 31% Chinese have household ¬incomes between $1,000 and $2,000 a year.
4. About 670 or 52% million have household incomes of less than $1,000 a year.
As you see China is a land of extra¬ordinary poverty.
And some dreamers to think that China can pull US and the world out of financial rut…
I’ve been looking for Chinese income statistics, but couldn’t find it. Could you show me the link?
I’ve been to China over 30 times since 1998 while working for 3 multinationals. It’s amusing to see “experts” who has not been to China or spent few days in the big Chinese cities recommending Chinese stocks… Wonder if they ever spent weeks at a time in gritty factory towns or poor interior areas…
Andy Xie is right – Chinese market is indeed a ponzi scheme and gambling den where the “house” is CCP (Chinese Communist Party).
Some sober FACTS:
1. China is a communist country ruled by 1 party with iron grip. CCP party bosses appoint the national/regional/local politicians and many private company managements since many private companies are ex-SOE (state owned enterprises).
2. Corruption in China is prevalent, rampant and one of the worst even down to lower ranking employees. For example, factory canteen worker receives an “envelopes” in scheme where he claims he received 10 bags of rice when only 8 bags are delivered.
3. There is almost no “law” since laws are written to support the communist party or corrupt local communist bosses. Judges are appointed by the local communist boss and few if any understand law. Many judges got job thru “guanxi” or connection and of course bribes.
4. The Chinese banks in are BIG TROUBLE. E&Y got in heaps of trouble for discussing hidden bad and noncollectable debts. Local communist cadres dictate banks to lend to their pet projects and of course friends who bribe them not to mention COMPLETE lack of transparency.
5. No one except pea size brains trusts the communist government’s statistics which are MANIPULATED to CCP’s wishes.
6. Many of the listed companies numbers are COOKED. Auditors and their management can be bribed and extorted. It’s beyond me how anyone would trust Chinese companies’ financials unless audited by Big 4. And even Big 4s audited numbers are suspect since most Chinese companies carry multiple books including one for taxation and another with slush funds and hidden losses.
7. Latest Chinese share and commodity appreciation have lot to do with communists pumping money to the economy by directing the banks to lend. This kind of stimulus cannot go on.
Now is good time to buy FXP when all the investment gurus in unison are recommending Chinese stocks and even “taxi drivers” and clueless herd investors believe China with 1/3 US GDP will save the world.
pls go back to that sophomoric businessinsdier.com site, where you and the other provincial mendicants can wallow in all your glorious depression.
Hey the market’s up today, must be the plunge protection team.
Anybody has the right to be down on China. I’m not sure how the economy will play out, but then nobody is. The place is a mess. What seems to be true however, is that the Chinese are excellent at manipulating numbers on paper. So never trust any numbers that come out of China. If the experts are reading the indicators off paper to make their analysis, then it’s sketchy business to listen to them.
And China isn’t communist. They never really were. But certainly they’re not now. Communists don’t have a stock market. That’s capitalism, which does fit nicely into the Imperial System of China. The one-party system is another name for the Imperial Court. Mao was no Communist President. He was an Emperor. The Chinese are very much in love with the way they do things… they are never going to change.
Chinese men are also in it for themselves. They don’t care if they destroy the market, their corporation, the environment, or even China as long as they get their personal benefit. That line of thinking is true from the President all the way down the street thugs. That’s the Chinese way and they love to be that way. So consider that whenever you’re dealing with a Chinamen.
So, if the past is any guide, I take this to mean that JP Morgan is wanting to unload its China shares before the bottom drops out and is looking for suckers to to keep the price up while they do that. Or am I just being too cynical?
Hugh Hendry disagrees with JP Morgan. He says “China has swapped a dependency on foreign capital for a dependency on foreign demand”.