August 11, 2015

"The spillover effects from a slowdown in China are likely to be severe, especially alongside a US Federal Reserve that appears finally poised to abandon its near zero interest rate policy."

Financial Times For investors who are more bearish on China than consensus, Citigroup’s Asian economists suggest shorting a group of no less than nine currencies, including the Chilean peso, Norwegian kroner, rouble, Malaysian ringgit, Australian, New Zealand and Taiwan dollars, Korean won and Thai baht. by Henny Sender

'Meanwhile, Goldman Sachs is reversing some long term macro calls. A decade ago, Goldman encouraged investors to short the US dollar, given slowing growth and high debt levels, take big positions in emerging markets with their clean balance sheets and superior growth prospects, and embrace commodities, given under-investment and supply constraints.

'All these factors have now reversed. “A decade of investment in commodity productive capacity and new technologies has created excess capacity in most commodity markets which will weigh on both costs and commodity prices, creating a deflationary impulse globally,” Goldman warns.

'The explicit point many economists are making is that China is slowing more than official data suggest. “We believe China’s actual growth rate is much lower than reported — about 5 per cent versus the reported 7 per cent in the first half,” the Citi economists note. And their implicit point is that a slowdown in China is harder for its trading partners and manufacturing competitors than it is for China itself.'

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