China Has a Credit Bubble, But So Does the Whole World

I think the beauty about Asia, in terms of being an active manager, is that markets do not move all in concert. There are some markets that are strong. Let’s take the Indian market. It bottomed out in September 2013 after around 17,000 on the Sensex and since then its up more than 80 percent. Many other markets since 2013-14 are actually down. And so India had a huge move. This wasn’t the case for China until recently. 

Recently, China has been picking up. The economy looks slightly better at the present time because there is also a massive injection of liquidity both through the government and the banking sector. Suddenly now, western investors are realising that maybe we are being bearish about China. Yes, they have a credit bubble but so does the whole world. Maybe the Chinese credit bubble can be managed whereas in other countries the credit bubble may be a bigger problem particularly with respect to pension firms and unfunded liabilities. 

So, the money is suddenly flowing into China and, I have to say, I am not quite bullish about China. But, more than a year ago, I started recommending Macau gaming stocks, asset play on the Chinese recovery. Most of these stocks have almost doubled in price.

- Source, Bloomberg Quint