Just as an update, below is what we were saying mid-May about China. We're sticking to it even if the emerging mkts are not viewed as attractive as before (according to the World Bank).
- Lack of growth within emerging markets will not impact China as much as other economies mainly due to the fact that China's domestic mkt is very large and it yet hasn't been tapped into significantly.
- With a huge surplus, China can further stimulate consumer spending and over time prices can adjust slightly lower to meet average consumer income/wealth. China also has huge capacity to produce many goods. The "buy Chinese" thinking will work in China, unlike Obama's "buy American" in the US.
- Lastly, regarding commodities, China's relationship with Iran and other countries with which the US does not conduct business (supposedly), in addition to its own huge supply will help. We don't think Iran's instability will impact it much. Whichever government gets in there (unless something plugged in by the US or its favorite ally in the Middle East) Iran will do its best to maintain its relationship with China, which is also beneficial for China.