In China, Bad News Is Just Bad (by Chen Long, GaveKal Capital) - It never rains but it pours

In China, Bad News Is Just Bad (by Chen Long, GaveKal Capital) - It never rains but it pours. China's official statisticians announced yesterday that the economy's annual growth slowed to 7.4% in 2014, the slowest rate in 24 years. Their news came hard on the heels of yesterday's -7.7% slump in the domestic A-share market, triggered by a tightening in the regulations governing margin trading. That intervention came out of the blue, although the regulators are clearly concerned by the growth of illicit margin trading, which has risen rapidly in the last three months. The deceleration in GDP growth is less of a surprise, as most hard data have been trending lower for some months. We believe that China's growth will continue follow a gradual downward trajectory this year. The crucial question for investors is whether bad news will turn out to be good: How much will the authorities ease their monetary and fiscal settings in response? And will their policy reaction change the trajectory of the economy and support the stock market...continued: (VIEW LINK)


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