Economy could begin to recover in April, claims Gordon Brown Telegraph. Subhead: “The economy could begin to recover as early as April 2, Gordon Brown has signaled.”
If by “recover” one means “temporarily looks as if it is no longer getting worse,” even I might agree that is possible.
From Merrill Lynch’s Fund Manager Survey (dated 18 February, by Gary Baker and Michael Hartnett):
A jump in optimism on the Chinese economy (growth expectations leaped from -70% to -21%) and further policy ease led to a marked improvement in global economic sentiment. While 90% of investors think we are currently in a global recession only a net 6% see a weaker economy in the next 12 months (versus 24% last month and 60% in October).
Two things have driven the optimism about China, and they appear overblown. The first is the rise in lending. Michael Pettis reported that a lot of that was sham transactions created so that banks would meet government target. The second reason was that stock prices have rallied. Well, one analyst estimates a big chunk of the lending went into…..the stock market!
Analyst Andy Xie throws cold water on the Chinese rally, as reported in Bloomberg:
China’s stocks rally that’s made the Shanghai Composite Index the world’s best performer this year will falter as profits are “non-existent,” according to independent economist Andy Xie.
The Shanghai measure has gained 21 percent this year, the most among 90 global stock gauges tracked by Bloomberg. The index is valued at 17.4 times earnings, the most expensive among the so-called BRIC markets of Brazil, Russia, India and China.
The rally will run out of steam as “profits are non- existent and valuations are still expensive,” Xie, former chief Asian economist at Morgan Stanley, said in an interview yesterday. He correctly predicted in April 2007 that China’s stock market was a “bubble” and would burst….
“It’s a rampant practice,” said Xie. “Here you are borrowing at 1.5 percent and the stock market rises, so you put your money into stocks and hope to get out after making 20 percent.”
To their credit, the Merrill team drily noted, “February’s optimism must now be corroborated by global lead indicators in coming months to avoid investor disappointment.”