Investors are no doubt full of quirky analogies they can employ to describe their experiences of China, but perhaps the best comes from Russel Clark, the CIO of hedge fund Horseman Capital, who recently compared China to the 1987 sci-fi action movie Predator.
ZeroHedge reports that Clark offered up this gem in his firm’s monthly letter after the $2.5 billion fund was up a staggering 9.4% for August following China’s market rout.
Clark recalls how the film features a special ops team ordered on a mission to a South American jungle, that are slowly hunted down by an alien creature.
They try to trap the creature, but it defies anything they have seen before: it can turn itself invisible, has infrared vision, and uses a shoulder mounted laser rifle. Nearly all of them succumb to the Predator.
The explanation is long and can be read here. In short, for bears, the Chinese government is like the Predator: continually using special abilities that were previously unknown. Bearish investors meanwhile have been picked off relentlessly and effortlessly by the government and the central banks.
But things have unraveled since. The stock market began to sell off and pressure built on the currency, prompting the Chinese to devalue the renminbi. This had the unwanted effect of stoking fear in the investing public, increasing both capital outflows and pressure on the exchange. Clark concluded his analogy:
“In my experience, in the mind of the international investment community, small devaluations tend to encourage even more capital outflow, which in turns leads to even large devaluations. Or to borrow, a line from Predator, ‘If it bleeds, we can kill it’.’’
One wonders what other movie analogies work to describe the Chinese economy.
Photo: Malte Sörensen