Karl Francis

Why I Sold My China Positions

Nouriel Roubini is a perma bear, no China expert. Following him, you should not hold shares at all.
If you base your decisions on the hodgepodge of partly inaccurate, partly irrelevant facts you present, I wonder how you can make sound decisions and outperform the markets. In Q3, China's economy was growing at 9% y/y, nominal retail sales were up 21% y/y, despite US in recession, flat export growth, depressed steel prices, flat local real estate markets. 3/4 of its growth is internal, independent from exports; a lot comes from infrastructure investments, financed through high savings rates. The huge stimulus package will make sure that impressive growth will continue.

For stock selection, you have always to look at the sector and the particular company. Not all sectors will benefit equally. Chinese pharmaceutical stocks in particular are immune to the global crisis, in a long term impressive growth market and some of them are dirt cheap currently, certainly no sells.
Retail sales will also continue growing at high rates. China 3C, that you mentioned, is well placed in its segment of the retail sector with its 1000+ stores, had impressive same store growth in Q3, outperforming its sector, and is trading at a PE ratio of 2, or 1.4, if you deduct net cash. The company will continue to grow organically and through acquisitions, certainly no sell either