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A sign of hope for China's economy?

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March 04, 2009 – Comments (3) | RELATED TICKERS: FXI

China's purchasing managers' increased slightly to 49 in February (from 45.3). It is now up significantly from the low of 38.8 that it hit in November and it is approaching the magical level of 50, which is the break even point between expansion and contraction.

Some are taking this as a sign that the Chinese economy may have bottomed while other analysts believe that this bounce in the index doesn't mean much and that a meaningful recovery in China will not begin until the second half of 2009.

There are rumblings that China plans to announce in the near future that it will increase its spending on welfare in the to prevent the social unrest that many fear it will experience if the jobs market does not improve soon.  Additional spending in infrastructure may be announced as well.

The Mr. Chinese Market certainly looked at the manufacturing index news positively. The Shanghai the benchmark index rose 4.7% yesterday.  While many of the predictions for 2009 that I wrote up last summer were likely too optimistic, I am still very comfortable with my forecast that Chinese stocks will significantly outperform U.S. stocks in 2009.

A sign of hope for China's economy

Deej

3 Comments – Post Your Own

#1) On March 04, 2009 at 8:21 AM, djemonk (< 20) wrote:

I am still very comfortable with my forecast that Chinese stocks will significantly outperform U.S. stocks in 2009.

But, which ones? 

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#2) On March 04, 2009 at 8:30 AM, djemonk (< 20) wrote:

I agree that China's economy should outperform ours over the forseeable future, but it's not as easy for me to parse.  I wouldn't know which are the best Chinese companies or even what that means in China.  It seems that, in order to succeed, you need governmental support over there and I have no idea what the Chinese government is doing.

In talking to some of my Chinese friends who moved here to NYC, they agree that the Chinese government is looking out out for the Chinese government first and the Chinese people 2nd.  Foreign investors do not seem to be a priority for them so I wouldn't expect much love from the gov't.

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#3) On March 05, 2009 at 11:32 PM, Benkgee wrote:

 China has a high rate of saving and low rate of debt, that give Chinese authorities plenty of room to stimulate its economy. The present crisis will force China to restructure away from overly dependent on exports. China has 4 times the population of the US. Giving  the chance, Chinese people not only know how to save, they know also how to spend once they reach a certain level of comfort.

China will be able to save itself and if by doing so also help some other countries, that will be a win-win situation. But if China can not save itself, it can not help anybody else.

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