China’s housing market is
experiencing the “mother” of all bubbles, and a property slump
will hurt everything from Australian mining firms to Europe’s
luxury-goods makers, according to Grantham, Mayo, Van Otterloo
Co.
“We are very concerned” about China’s economy, Peter Chiappinelli, a portfolio strategist for asset allocation at
Boston-based GMO, said at the Bloomberg Link Portfolio Manager
Mash-Up Conference in New York. “All bubbles pop eventually.”
GMO, which oversees $97 billion in assets, is betting that
shares of Chinese real-estate developers, construction companies
and cement producers will decline, said Chiappinelli. GMO is
also betting against Australian mining companies, German
carmaker Bayerische Motoren Werke AG (BMW) and British luxury handbag
maker Burberry Group Plc. The companies have been benefiting
from China’s housing boom and expanding middle class over the
past years and are “very exposed to” a China slowdown, he
said.
An index tracking housing developers in the Shanghai stock
exchange fell 18 percent last year as the government limited
mortgages and restricted home purchases to rein in home prices
that increased in the previous two years. The cooling market
helped slow gross domestic product growth in 2011 to 9.2
percent, matching the smallest expansion since 2002.
It is “very difficult” to have an optimistic view on
China because the housing price drop will afflict banks and the
European debt crisis undermines its exports, said Lisa Emsbo- Mattingly, the director of research in the global asset
allocation division of Fidelity Asset Management.
‘Very Concerned’
“We are very concerned about China,” she said at the
conference. Europe is a “negative drag” on the country, she
said.
China’s exports and imports fell for the first time in two
years in January and lending grew less than estimated, a
government report showed on Feb. 10.
The International Monetary Fund said in a Feb. 6 report
that China’s economic expansion may be cut almost in half from
its 8.2 percent estimate this year if Europe’s debt crisis
worsens, a scenario that would warrant “significant” fiscal
stimulus from the government.
To contact the reporters on this story:
Ye Xie in New York at
yxie6@bloomberg.net;
To contact the editor responsible for this story:
Emma O’Brien at
eobrien6@bloomberg.net