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Global Positioning & Fundamental Reality: Lots of Confusion Out There

Global Positioning & Fundamental Reality: Lots of Confusion Out There. Tim Seymour/Fidelity Trader Expo Seminar February 13 th 2014. China. PMI for January 49.5 shows contraction Structural problem: Chinese labor wages are 3x higher than those in Vietnam and Indonesia

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Global Positioning & Fundamental Reality: Lots of Confusion Out There

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  1. Global Positioning& Fundamental Reality: Lots of Confusion Out There Tim Seymour/Fidelity Trader Expo Seminar February 13th 2014

  2. China • PMI for January 49.5 shows contraction • Structural problem: Chinese labor wages are 3x higher than those in Vietnam and Indonesia • But China PMI while weakening trend has been in a range of 48-52 for largely for last 2.5 years… • China debt issues will be headlines for the next 2years • Because they are an issue and have escalated recently • Social debt has risen from 145% of GDP in ‘08 to 205% in ‘13 • Using policy rates as a tool to pressure debt is seen as most effective tool yet may be a blunt instrument • Why does China “tolerate” the negative debt headlines • because the Chinese want the headlines • Chinese corporate debt will exceed the US in 2015 at current rate • This week another trust default in China • China is in best position to push through policy of all major EM’s • China can throw more $$$ at their problems than anyone

  3. China • Tactical BUY (Trading call) based on seasonality (PMIs significantly higher in March and April than in the other 10 months over the past nine years) • Use negative credit headlines as a trading opportunity • All-time low valuation of 12-month forward P/E of 8.5X • Recent correction is an opportunity • Look at thematic/high quality companies that may benefit from the positive vibes coming out of the impending NPC and CPPCC events • Play “new China” themes (internet, ecommerce, healthcare, clean energy, environmental protection • recent correction is an opportunity • PBoC attempting to establish an interest rate corridor with 7d repo ceiling set at 7% ceiling - means they are aware of liquidity stress and are offering counter-measures

  4. China Internet is Bet on Consumption:China Internet Index vs SPX 1yr

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