Here are key quotes relating to China from an interview with the head of Schneider Capital Management ($4 billion under management):
On the Chinese economy:
....China had an overheated investment boom, but
the consumer was very mute. Now we are seeing a switch and consumer
spending is accelerating to double-digit levels in China, and
investment spending, which the government has tried to slow down, is
responding and going from hyper-growth rates to the low teens, which is
a good thing. China is becoming a more balanced economy....
On steel stocks:
....those stocks have done very well and steel
prices have more than doubled since we spoke last. They hit our price
targets and we sold. There has been some supply coming on in China, and
so this is one area in commodities where there is not a favorable
supply-demand situation. With steel prices more than twice where they
were a year ago and more than twice the long-term level, it is just not
a good risk-reward any longer by my standards. It is possible, too,
that China will be a net exporter in the next 12 months, and that would
be a negative for steel prices.
On current investments:
....we've moved into copper, chemicals and papers,
areas where there is little Chinese capacity -- unlike steel. They
don't have any copper reserves. They have a little bit of paper
capacity coming on in China. But there is not much global supply in
those three commodities, particularly with chemicals, and trends look
really good at least through the end of 2006.
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