Contrarians may have interest in the increasing conviction of short-sellers of Chinese shares. One example: in Wednesday trade in Hong Kong, 1/5th of the turnover of Chinese bank stocks was shorted. "The divergence (between bulls and bears) has never been so huge," says an analyst.
China's manufacturing continued to expand in May, but at the slowest pace in nine months, with the Purchasing Managers' Index at 52 vs. 52.9 in April. The government has been pushing ahead with its campaign to cool inflation and the property market, but economists note the PMI has a seasonal pattern of falling in May in any case.
Shanghai's attempt to snap a seven-day slump fails at the last minute. While some economists aren't worried about the recent Beijing-induced drop in growth, others worry deeply entrenched inflation will force China to keep its foot on the brakes for a long time.
Chinese shares, -1.0%, close lower for the 7th consecutive session, bringing the cumulative loss since the April high to more than 11%. Tudor investment is among a group of hedge funds bullish on Chinese stocks, loading up on call options on FXI during Q1.
The HSBC China PMI for April falls to 51.1, the slowest pace in 10 months. "There is no need to worry about a hard landing," say the bank's analysts, although admitting price stability has taken over from growth as policymakers' key focus. Chinese shares are slammed, -2.9%.
Underperformers in 2011, emerging markets, particularly India and China, could benefit from the sell-off in commodities as easing inflation pressure allows central banks to take their foot off the brake. With stock valuations low on a relative basis, look for liquidity to shift from commodities to these markets.
Want to put your money where the world's banks are putting theirs? Then look to China, which saw an 86% increase in investment from foreign bank lending (to a rate-adjusted $77B). Of course, the last time China approached this share of global lending, the late-'90s Asian crisis happened.
"The Chinese economy is slowing down more than people realize," says Goldman's Jim O'Neill, who believes it's no coincidence that commodity prices are turning south. The effusive BRIC bull says this is a good thing as it will allow China to stop tightening money. Did it ever start?
China shares -2.3% following the hawkish tone in the PBOC Q1 monetary policy report. "Stabilizing prices and managing inflation expectations are critical," says the report which also say bank reserve requirement have no "absolute ceiling."
Fervent China bull Jim O'Neill of Goldman lowers his temperature a few degrees, expecting more monetary tightening as the latest data show neither the economy slowing nor price pressures abating. He notes China A shares have given up 1/2 of YTD gains, suggesting a loss of confidence by the locals.
Rather than deciding on whether to bet on China or take a punt with India, smart investors should seek exposure to both: "Picking one and leaving out the other would be a high-risk strategy," one strategist says. The good news: Both of the world's most populous countries can point to powerful population trends that bode well for continued strong growth.
China reports a Q1 2011 trade deficit of $1.02B - its first quarterly deficit since 2004 - as surging commodity prices drive imports to a record of over $400B. Analysts expect a Chinese surplus for the full year of $160-200B but say it should narrow if oil and commodities stay high. This could help ease tensions with Washington.
You're not fooling anyone, China: Tightening monetary policy can't dent what are actually negative real interest rates, Andy Xie writes - and combined with inefficiency in its public sector, the result could be stagflation (and then, as it is in emerging economies, currency devaluation and a new crisis).
With Chinese shares up nearly every day for the last 2 months (a 12% run), Macquarie declares it safe to go in the water, raising China to market-weight from underweight, as it expects monetary tightening to end soon. China +1.2%. China ETFs here.
China might be slowing more than people realize, Michael Pettis says. In Q4 the PBoC said it believed the global economic recovery would continue and that stabilizing prices was its top priority. But at a conference this week, the PBoC questioned the stability of the global recovery, and shifted its focus to "managing liquidity efficiently."
Thomas Pan+ FollowFollowing- Unfollow|Send Message13 Jul 2010
China stocks fall most in two weeks as loan curbs maintained FXIFXPPGJCNY
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