Could this be the first year of a bull run in China

By: Andy Davidson

Is this the year that China commencement a bull run lasting a few years.

'As most economies develop they go through an 's' curve. Growth gets faster and then decreases at around £4000 GDP per head. This stage has now been reached by China, but what makes this an exceedingly thrilling time is that never previously has a country as large as China gone through the 'S' curve.
This must be unique, without doubt. The sheer scale and rapidity with which this is happening, coupled with an economy where things get finished must make it thus.

Anthony Bolton of Fidelity in the UK foresees that China will have overtaken Japan by the end of next year to develop into the world's second major economy. China is benefiting from robust long-term growth and has a strong central government, which probably makes it a better prospect than India which suffers from much more red-tape.

'China is the third major economy in the world at present but only the 10th in terms of stock market magnitude.'

Bolton's optimistic view of China is because of his assumption that the economies of the West will continue to endure setbacks as they come out of recession and the credit crisis.

He believes that the UK and the West is in a stage of fast economic upturn but that will slow down next year. To solve today's problem the West has borrowed from the future.

It's not that the western economies are in a terrible business environment but it is awfully probable that they will have slow growth and face headwinds. China can continue to increase at a comparatively high rate.'

Bolton has stated that China was in the initial year of a multi-year bull run and that it would be 'very unusual ' if it was to cease after just one year.

Next year, the majority of the world's markets may perhaps go through a consolidation phase. We are in an environment where interest rates will remain somewhat depressed and governments won't want to exit their support mechanisms too quickly. If they do it too quickly, they may well return to recession.

However there could be more upside to come for Western stocks in the short term. This sort of setting gives rise to liquidity thus there is more upside to come.'

Bolton said the current debt issues in Dubai might be an issue for a number of western markets, but not for China on account of its relative strength.

Article Source: http://yourfinance.co.za

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