Today at 11AM EDT, we hosted a flash call titled Are You Short China [and Other Emerging Markets] Yet? On the call, we provided an update to our bearish thesis on emerging markets and expanded upon a recently introduced a negative bias on Chinese financials and property developer stocks via the Global X China Financials ETF (CHIX). Each of the CHIX’s top 10 holdings are listed on the Hong Kong Stock Exchange for those of you looking for more liquid and direct ways to play this thesis.
- With respect to emerging market assets broadly, we continue to recommend that clients sell, short or avoid EM and commodity exposure altogether.
- Looking to China specifically, we think the outlook for Chinese credit growth is structurally impaired. Moreover, we anticipate that growth in non-performing loans will accelerate sustainably over the long term. Lastly, we believe that net interest margins across the Chinese banking industry face immense regulatory headwinds that may ultimately have dire consequences for China’s fixed assets investment bubble.
- At a bare minimum, investors should steer clear of these obvious value traps over the intermediate-to-long term. Moreover, we continue to believe assets linked to Chinese industrial demand will remain under pressure for the foreseeable future.
To access the replay podcast and accompanying presentation, please click on the following links:
Podcast: CLICK HERE
Slides: CLICK HERE
As always, if there are any questions please shoot us an email and we’ll be sure to get back to you with a reply(ies).
Thank you for being a client; we are grateful for your support.
The Hedgeye Macro Team