The good folks at Reuters report that European hedge fund managers are betting that China's once red hot economic growth will cool dramatically in 2012, hitting companies, economies and commodity prices that have been fuelled by the world's second largest economy in recent years.
Managers are taking bets ranging from short positions on equity markets or the currency to buying credit protection on companies that export to China. Others are shorting natural resources stocks in other countries that rely on Chinese demand.
"China is an inflated castle in the air," said Pedro de Noronha, managing partner at London-based hedge fund firm Noster Capital, who is using futures to short Chinese H-shares and is also holding a short position on the yuan.
"We're quite sceptical and worried," he added. "China needs a healthy U.S. ... consumer and it's not getting it right now.... China could be a catalyst for a severe leg-down in markets," he said.
He also cited recent cases of fraud in China and the country's booming real estate sector as issues.
http://www.reuters.com/article/2012/01/16/uk-hedgefunds-china-idUSLNE80F02920120116
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