Saturday, January 23, 2010

Global investment poll finds China losing favor

Fears of a market bubble in China have tempered enthusiasm for investments in that country even as confidence in U.S. markets has risen, according to a Bloomberg News survey.

China, the world's fastest-growing major economy, is viewed as a bubble by 62 percent of the respondents. About one-third said China offered the best investment opportunities over the coming year, almost tied for first place with the United States and Brazil, though down sharply from October, when 44 percent ranked China best.

This time, nearly three of 10 investors said China posed the greatest downside risk, ranking it the second-riskiest market after the European Union.
"We think that China is producing and is building up inventories at a rate that no other country or region can follow at the moment," said poll respondent Alcibiades Angelakis, head of marketing and research at Epic Investments in Athens. "This cannot continue for a long time, and we fear that in the second half of this year things will slow down."

Concerns over a potential bubble in China have been mounting recently. Hedge fund-investor James Chanos, president and founder of New York-based Kynikos Associates, one of the first investors to foretell the 2001 collapse of Houston-based energy company Enron, has said China looks like "Dubai times 1,000 -- or worse."

Chinese lending limits

After new bank lending in China last year surged to a record, banking regulator Liu Mingkang said he has told some banks to limit lending and restrict overall credit growth.

China's benchmark Shanghai Composite Index dropped 95.02 points, or 2.9 percent, on concerns that the nation's central bank may raise interest rates. The index has lost 3.8 percent this year, making China the worst performer among the world's 10 largest stock markets.

China reported that its gross domestic product surged to 10.7 percent in the fourth quarter, marking its fastest growth in any quarter since 2007.

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