According to a recent Reuters article, European hedge fundmanagers can’t short China fast enough, betting that its economic growthwill cool dramatically in 2012. Their “short” bets are mostly in equity markets and the currency, and their “long” (hedging) bets are credit protection on companies that export to China.
Pedro Noronha at Noster Capital:
“China is an inflated castle in the air” …. he is using futures to short Chinese H-shares and is also holding a short position on the yuan.
“We’re quite skeptical and worried. China needsa healthy U.S. consumer and it’s not getting it rightnow…. China could be a catalyst for a severe leg-down inmarkets. Corporate governance and the rule of law is very differentfrom the West, and there’s huge bad loans issuein banks. The real estate market is probably in the biggestbubble in the world we have right now.”
Victor Pina at Javelin Capital:
“I think China will slow down. China has no alternative to what it is doing, which isputting the brakes on credit expansion. If China slows down to 7 percent, that will be a dramaticslowdown for most people. The 8 percent contemplated by the bearstrategies, that’s the upper boundary.”
Pina is shorting natural resources stocks in Hong Kong, as well as Brazil and Russia, believing the slowdown means the pullback in some commodities is “for real”.
“If you look at copper, for the first time in ages there isoverstocking. The price is high and inventory is high. Eitherthe world is going to grow or the price is going to fall,” hesaid.
“It’s going to be a difficult year for BRICs (Brazil, Russia, India, China) markets in commodities.”
Hugh Hendry (a notorious China bear) at Eclectica:
His winning “China bear” strategy made his fund gain 46% in 2011. The fund holds credit protection on Japanese companiesexposed to China, rather than a short position on HongKong-listed Chinese shares. He still has reservations regarding the Chinese economy.
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We should be shorting EWZ also. Plenty of puts in the Chicago exchange.
LONG FXP, EEV. SHORT EWZ, PBR, VALE, X "MERPOSAS", LIKE OGX.