Macro fails investors in China says AllianceBernstein
Investors should not pay attention to macro issues when assessing investment opportunities in China AllianceBernstein chief investment officer, Pacific Basin Value Equities, Stuart Rae said.
Speaking in Sydney, Rae said China's gross domestic product was fairly easy to manipulate and did not give a good indicator of what was happening in the country.
"Look at a broad range of activity measures to try and get a look at what's happening sector by sector," he said.
Assets which did not need inventory, such as power and cement, could be good measures of current activity, he said, and although growth in those sectors slowed last year, it had picked up and revealed single digit growth.
Rae said the implications for Australian mining companies were more positive than current sentiment would have investors believe.
"I think people worrying about China collapsing, they're not focusing on the right thing when they want to try to forecast commodities," he said,
Although demand growth was slow, supply side issues were the real problem with commodities such as iron ore, according to Rae.
A large number of suppliers and customers in those markets meant imbalances would cause prices to fall.
"The risk is that companies get their estimates wrong for future demand and invest too much money and put too much cap ex into the market and prices fall," he said.
"Demand is easy to forecast but supply is not in many cases."
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