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Mindful.Investor
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I am an IT professional with MBA from NYU Langone program. I view the investing as part of my practice to control the greed and fear.
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  • Buy Chinese Stock Now, There Will Be No Hard Landing In China! 0 comments
    Apr 17, 2012 11:52 PM | about stocks: ADY, CAF, SVN, SOHU, FSLR

    Although US economy is recovering moderately, US stock market is topped in short term. First quarter's new factory order data is pretty weak, combining with recent sky rocking oil price, US economy will not have much positive side in the next few months. Once investors realize US's recovery path not as smooth as they hoped, they will immediately worry about our vulnerability to any EU bad news.

    So what is the next attractive asset class we can invest? Chinese stock market. I've been holding neutral to bearish view on Chinese market for last two years, but now it's the time to invest, for following reasons:

    1.China will not suffer hard landing in next two years, economist always worry China will have a hard landing soon, if we call a country's GPD growth dropping from 10% to 8% a hard landing, how can we invest happily in US with GDP at 2% and in EU at -0.3%? Also keep in mind Chinese government chose to tighten the monetary policy to lower the GDP growth, while in US Fed is doing whatever it can to increase US's GDP just over 2%.

    2. Chinese stock market did under perform US in the last two years, but it's not because of any systemic problems like those in US or EU, instead, it's mostly because Chinese Central bank's extremely tight monetary policy (benchmark rate at 6% and bank reserve at 20%). It's understandable Chinese Central bank had to tighten the monetary policy to fight against inflation, as they decided to float Yuan to stimulate export for the last two years. And no stock market will perform well with interest rate higher than 6 percent.

    3. Most importantly, Chinese domestic consumer market finally is catching up, now Chinese government can increase the Yuan band to fight against inflation, so it can now ease the monetary policy to stimulate the growth, further encourage Chinese business and consumer to spend, once Chinese Central bank starts to cut interest rate (soon in my view), Chinese stock market will jump.

    Disclosure: I am long ADY, CAF, SVN, SOHU, FSLR.

    Themes: China Stocks: ADY, CAF, SVN, SOHU, FSLR
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