Questioning the China Growth Story

As China-related ETFs end the month continuing to lead year-to-date returns, an army of strategists, including myself, are chipping away at the China growth story questioning the validity and sustainability of economic data coming out of the mainstream financial press. The tripling of lending during the first half of 2009 and the stockpiling of materials as well as the questionable accounting practice of booking sales upon shipment are just some the issues on the table.

Meanwhile, Brad Durham of EPFR Global comments that investors responded to a slew of better than expected earnings and macroeconomic data in late July by pumping fresh money into a broad range of asset classes, with 21 of the 24 major equity, fixed income and sector ETF and fund groups tracked by EPFR Global posting inflows for the week ending July 29.

Global-tracked equity funds posted collective inflows of $9.52 billion – the highest weekly tally since mid-June, 2008 -- while fixed income fund groups (excluding Money Market 
Funds) took in a net $4.36 billion.

Comments

[Carneades:]

This myth of robust Chinese growth is necessary for some parties as they attempt to justify high equity valuations

Aug 05 11:36 AM