In the last post I wrote about Chinese excess of debt. Since I was not entirely convinced about the argument I have tried to dig deeper. Morgan Stanley's Qing Wang wrote extensively on March 31st, 2010 about this issue:
He maintains, that China's overall debt level is at 170% of GDP in comparison to the debt level of 250%-500% for developed countries.Moreover, he thinks external debts are more significant "because domestic debt can be offset by domestic assets". And "measured by external debt, China's indebtness is one of the lowest in the world". The author goes on comparing debts to assets, cash flows etc. and sees no systemic risks. However, intransparancy of non-performing loans of some local banks is weighing on their stock prices.
As for capacity, it is apparent that there is overcapacity in real estate and some industries. However, I doubt that these sectors can drag down the whole economy substantially. Furthermore, the introduced interest hikes should damp the growth of capacity.
On October 22, 2010 in Morgan Stanley's Global Executive Brief Gregory Peters and Jason Draho summarize the situation: "With QE supporting a risk-on sentiment, we would: (1) sell USD; (2) go long equities, maintaining a preference for EM over DM".
It's again: Don't fight Fed
Keine Kommentare:
Kommentar veröffentlichen