Andy Xie is former Chief Asia Economist for Morgan Stanley - below is a 6 minute clip from Bloomberg yesterday. If you are a regular reader of Fund My Mutual Fund, you will see Andy supports many of the same concepts we've been building piece meal over the past 9 months via countless readings, in terms of what is happening in China. It is nice to see someone much closer to the action supports the views we've been constructing from many thousands of miles away.

While I have no price target on the Shanghai index, Xie thinks fair value is closer to 2000 (or less) - recall we just have filled the gap (late May 2009) in yesterday's session to 2667. That does not mean there is not more downside eventually; I'd love to be a buyer down around 2000 myself but without having a crystal ball will be making purchases on any path downward; I also have a few other Asian markets I am trying to get more exposure to, but at lower prices. For example, Hong Kong is only down 10% versus Shanghai's nearly 1/4th haircut.


To repeat earlier thoughts, I am encouraged China is taking some near term pain for intermediate to long term gain by attempting to pop potential bubbles now before they get out of hand.

  • China may have 200 billion yuan of new loans in August, the Beijing-based Caijing reported today on its Web site. That compares with 7.4 trillion yuan for the first half of 2009 and 355.9 billion yuan in July alone.

In contrast, as US officials in the Fed and Treasury have told us the past decade - bubbles in the US are invisible to the naked eye, hence we cannot take similar actions here (since no one can see said bubbles). Hence, we'll just keep printing US pesos and toss them in the air and when the next implosion happens we'll fix it. How? By printing more US pesos and throwing them in every direction.

Those who do not learn from history.... well you know.