Five Viewpoints: Is China A Buy Right Now?

June 24, 2013

IndexUniverse.com asks Dennis Gartman, Jim Lowell and others whether China is a good long-term buy.

 

Chinese stocks fell 6 percent last night and are now in a bear market. Newspaper articles are raising concerns about overextended debt and falling growth rates. Looking out over the next three years, is now a good time to buy Chinese exposure?

IndexUniverse asked five macroeconomists and asset allocators for their viewpoints. Their answers are listed below.

Jim Lowell

Jim Lowell
Editor in Chief
The Forbes ETF Advisor

Short China; Buy Europe

After years of compelling growth stories and growth rates that were the envy of the world, China's economy is slowing faster than forecast and likely faster than its government data foretells. As a result, I downgraded the two China ETFs I track (the iShares FTSE China Large Cap (NYSEArca: FXI) and the PowerShares Golden Dragon China (NYSEArca: PGJ)) in my Forbes ETF Advisor to "sell" in the May issue while upgrading the ProShares Ultrashort FTSE China (NYSEArca: FXP) to "buy." (To receive that issue, send me a request at [email protected].)

In that issue, I also upgraded some of the more nuanced, narrowly channeled European-focused ETFs, like the Vanguard FTSE Europe (NYSEArca: VGK) to broader-based EAFE ETFs. My view is that I'd rather go bargain hunting in more established and more transparent marketplaces at this juncture in the slow to slowing-growth global environment. This doesn't mean China won't have its role to play in a long-term investor's portfolio. But I think that unless and until Europe turns, China won't. So for now, the risks of being upstaged by even a small stake have me favoring rubies in Europe's rubble to any yen for China.

Or to put it another way: In one of my favorite films, detective Jake Gittes is told by Lieutenant Escobar, "Go home Jake; I'm doing you a favor." For investors, I'd change that to read, "Do yourself a favor: Stay closer to home."

[Dennis Gartman's opinion is next.]

 

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