Bearish Bass
If Zhang was spearheading the bulls, then Kyle Bass was leading the bears. Bass, of Hayman Capital Management, said at a later discussion that China’s economy was already experiencing a hard landing, creating “one of the biggest macro imbalances the world has ever seen." Bass, who’s highlighted woes in the nation’s banking sector, said economies closely tied to China, such as Hong Kong and Malaysia, are beginning to stumble.
Credit in Southeast Asian emerging markets including Malaysia and Thailand has grown “recklessly” and Hong Kong’s property market is in “free fall,” he said.
Money managers on stage with him mostly agreed. “It may be a little slower than Kyle thinks,” said Kenneth Tropin, founder of the $12 billion macro hedge fund Graham Capital Management. But a spike in commodity prices, driven by Chinese retail investors, is a sign that “things may become unglued,” he said, adding, “it’s a question of timing.”
At least five commodities in China gained more than 50 percent from their recent lows in just over two months as daily turnover on the nation’s futures markets jumped by the equivalent of $183 billion.
Vote Sanders
Paul Brewer, chief investment officer of Rubicon Fund Management, said China’s woes are worse than the U.S. subprime housing crisis.
Leon Cooperman, who runs equity hedge fund Omega Advisors, was more sanguine about prospects for the world’s second-biggest economy. China has been slowing for years without thwarting a three-year rally in U.S. stocks. "It’s overemphasized as an issue," he said.
“We are going to have ripples in China,” said EJF’s Friedman. “But this is a very powerful country. And the people who use it as some kind of bogey man -- it’s make believe."
Structured Portfolio Management’s Brownstein concurred. “China came out of a huge, huge mess and it is a huge country with a very, very diverse population,” he said. “I would rather put my money with a communist government than a capitalist government.”