Speaking at the CNBC Institutional Investor Delivering Alpha Conference in New York, billionaire hedge fund manager Bill Ackman had some interesting things to say regarding China:
“China is a bigger global threat by far,” Ackman said Wednesday at the conference. “The Chinese stock market is a fairly remarkable phenomenon and I think kind of a frightening one.”
“If you look at the Chinese financial system, you look at shadow banking, you look at the amount of leverage, you look at how desperately they worked to keep the stock market up. It looks worse to me than 2007 in the U.S,” Ackman said.
And he wasn’t the only one. According to Bloomberg, Elliott’s Paul Singer, DoubleLine’s Jeffrey Gundlach, and JP Morgan Asset Management’s Mary Erdoes also voiced their concerns about the region, citing everything from the reliability of their economic data to the opaqueness of their markets as things that either turned them off from investing in the nation or as future problems in the making.
As for the latter, Singer doesn’t seem to be as concerned as Ackman. While he did call it “way bigger than subprime,” he acknowledges that it “may not be big enough to cause a global financial market conflagration.”
Anyway, these views are in stark contrast to those of banks’ China research teams as well as those of Olivier Blanchard – the IMF’s chief economist. Blanchard recently called the region’s stock market fracas “very much a sideshow” while Goldman, Barclays, and a few other banks continue to assert that its overall impact on the economy will be limited.
While I’m normally inclined to side with fund managers on these things, something’s telling me that these guys really don’t have that much skin in this game. Let’s see who got it right in a few months time.
Photo credit: JERRYANG via Flickr