James Chanos has earned his famed for being one of the investors who saw the coming of Enron collapsed. With that kind of credentials, what he said will get some attentions.
Chanos, at least you are honest. You have taken short positions in Chinese developers and material builders. With enough actions from the Chinese government, the property prices will have to come down. There is also a good chance that housing stocks will suffer as demand slows. There is also a good chance that he will make some money for himself or his investors.
I disagree with his prognosis however this will sink China economy. Come on-lar. Please do not sow fear after you have taken some short positions to get people dump shares. Hedge fund managers are very good of amplifying fears once they spotted any fault lines.
April 8 (Bloomberg) -- China’s property market is a bubble that may burst by as early as this year, according to hedge fund manager James Chanos.
The world’s third-biggest economy may need to keep up the pace of property investment because up to 60 percent of its gross domestic product relies on construction, said Chanos. The bubble may begin to “run its course” in late-2010 or 2011, he said in an interview on “The Charlie Rose Show” that will air on PBS and Bloomberg TV.
China is “on a treadmill to hell,” said Chanos, who said in January the nation is Dubai times a thousand. “They can’t afford to get off this heroin of property development. It is the only thing keeping the economic growth numbers growing.”
Property prices in China rose at the fastest pace in almost two years in February even after officials this year re-imposed a tax on homes sold within five years of their purchase to curb speculation and ordered banks to set aside more funds as reserves to cool lending. The boom in China’s real estate has fueled concern that China may face a collapse seen in Dubai that has hurt the ability of some of its companies to repay debt.
Since his January prediction, Chanos, the founder of Kynikos Associates Ltd, has been joined by Gloom, Doom & Boom publisher Marc Faber and Harvard University professor Kenneth Rogoff in warning of a potential crash in China’s property market.
Chinese state and local governments are among the most leveraged to property-related borrowings and the nation will “ultimately” have to nationalize a lot of the bad loans that will arise from the end of the bubble, Chanos said.
China’s Reserves
China’s foreign currency reserves will be “one asset” that can be used to fund a cleanup of the banking system, he said. The country has accumulated a record $2.4 trillion of reserves, and $889 billion of U.S. government debt, partly a consequence of its exchange-rate policy.
Chanos was one of the first investors to foresee the 2001 collapse of Houston-based energy company Enron Corp. The investor said he is short-selling Chinese developers as well as companies supplying building-related materials to the country, without identifying any stocks.
In a short sale, investors bet on declines in securities by borrowing stock to sell on the expectation it can be purchased at a lower price before handing it back.
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