These 5 Charts Suggest Trump Trouble and Other Big Problems for China this Year

Posted by jbrumley on February 7, 2017 8:31 AM
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By Victor Reklaitis, MarketWatch

China’s economy will weaken this year, and investors are complacent about this risk, according to analyst Nancy Lazar.

It’s not all about U.S. President Donald Trump. His tough posture toward China is just one of its difficulties, said Lazar, a partner and head of economic research at Cornerstone Macro.

She has published a wide range of charts showing why her research company expects trouble for China. Below are five of them.

To be sure, other strategists are bullish on the world’s second-largest economy. One of Asia’s biggest money managers has said analysts are getting the warning signals wrong and beaten-down Chinese FXI, +0.44%  are worth buying.

1. A threat from Trump’s potential protectionist policies

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“Chinese exports have barely grown since 2014,” Lazar wrote in a note dated Jan. 20. “And now, Trump’s repeated threats against China risk igniting a trade war.”

2. Don’t be fooled by fourth-quarter GDP

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“Yes, just-reported 4Q GDP did improve some. But on balance, December data appear to be losing steam, as highlighted by our Eco Barometer,” she said, sharing the chart above showing her company’s key gauge for China’s economy.

3. China’s massive stimulus is unwinding

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“Gov’t spending growth has slowed significantly,” said Lazar, as she pointed to similar downbeat trends for sales of homes and autos in China. “The impact of these restraints is just starting to be felt.”

4. Investors are complacent

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There have been relatively few news stories lately about China’s slowdown, and that underscores how investors “don’t seem to be ready for the headwinds,” the Cornerstone analyst added.

5. Troubling trend for earnings per share

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“Chinese company EPS has been negative for 17 months … enough said,” Lazar wrote.

Courtesy of MarketWatch

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