Kevin Bertoli, Asian Equities Portfolio Manager at PM CAPITAL, says that fixed asset investment is the story of last decade in China. “China has had three years of consecutive year on year declines in manufacturing prices. Basically, it’s telling you that there’s too much capacity in the system. That’s telling us that the fixed asset investment story while you might have months where things look quite good, it’s probably not where you want to be focussed in the longer term.” He points out that they’ve recently initiated a number of short positions to take advantage of the decline in fixed asset investment. However, this decline should not be taken as a negative, as Asia transitions towards a consumer-led economy. “Reverting back to the old ways of stimulating your economy through fixed asset investment is the wrong way.” This transition won’t be a smooth ride, but it will ultimately create a stronger economy. Watch the interview below:
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