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Position: Long the Chinese Yuan via etf CYB

“China has been the primary beneficiary of globalization and it has been largely insulated from the financial crisis.” –George Soros, October 30th, 2009

The Chinese Minister of Industry is on the tape this morning suggesting that China’s industrial production could grow 16% in Q4 on a year-over-year basis.  If these numbers are reached, China will see accelerating sequential and year-over-year growth.  In 2008, Chinese industrial output rose 12.9% from 2007.   In 2009 to date, through three quarters, Chinese industrial production is up 8.7%, with acceleration of 13.9% in September year-over-year.  No matter how these numbers are sliced, they are monsters.

In addition, according to both a government sponsored purchasing managers index survey and a HSBC sponsored release over the last couple of days, manufacturing expanded in China at the fastest pace in 18-months.  The Chinese government reported that its purchasing managers index rose to 55.2 in October, which was a full point above September and the eight straight month of gains. 

Clearly, the Chinese economy is accelerating, which is both a function of the recovery of the global economy and the impact of internal Chinese stimulus.  In contrast to Soros’ point above, China did see an economic deceleration this year, though obviously a slowing of double digit GDP growth to high single digit GDP growth is still a favorable outcome.  In support of Soros’ point though, China saw a continued large scale expansion this year when most, if not all, major economies were shrinking.  In the share game of global GDP, the Client has taken her share year-to-date.

In the simple table below, I’ve outlined the reported GDP’s of the globe’s three largest economies this year:

The Client is Roaring - image001

While Soros’ point may be a bit off as China did experience a deceleration  in GDP this year, China clearly has been much more insulated from the financial crisis and has taken serious share in the global economy in 2009.  Recent data points and comments from the government, as outlined above, only support this trend.  The Client continues to ROAR.

Daryl G. Jones
Managing Director