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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (12629)	4/26/2004 10:03:42 AM
From: ild	Read Replies (1) \| Respond to of 110194

China: Perception vs. Reality Andy Xie (from Tokyo) morganstanley.com ... Resource Bulls The resource sector companies presented to investors a picture of supply shortages that will last. The critical call is that China’s current trend is not cyclical but sustainable. Even though the resource sector is investing aggressively to expand capacity, China’s demand would grow equally fast or faster and, hence, the current exalted prices for minerals would last. The call on China’s demand, however, is not credible to me. China’s investment demand is growing three times as fast as the trend. If the current trend lasts for two more years, China’s fixed investment would rise above 50% of GDP. Such a high level of investment in a major economy is unprecedented globally. In my view, the super strong Chinese demand for minerals is likely to end in the coming months. I am bullish about resources over the long run. I believe that 2-3% real price appreciation in resources over the next two decades is likely due to China’s demand. But, the dramatic increase in the prices of mineral resources by 50 or 100% reflects China’s investment bubble rather than the normal appreciation with China’s industrialization. ...