Readers know that we are adamant China bulls. But, sentiment sometimes gets in the way. Investor nerves are frayed - and this is the background to what follows.
Tomorrow, China releases some inflation data. Subscribers know that we are not worried: inflation is being driven very much by food prices, over which no Central Bank, China's included, has any power.
However, as market nerves are frayed, any "bad" headline data is going to frighten people into thinking that
1. China will tighten, and that
2. Her tightening measures will work.
We disbelieve these two assumptions, but the market will not see things as they are, but as the market itself is feeling. Feelings will override any rational analysis, the result being that any bad headline data will cause a strong A-share sell-off.
That sell-off, in turn, will whack our Asian and later the US market - as we saw some weeks ago.
In China, this will create value over the longer term