‘Frontier’ Hedge Funds Identify Opportunities Embedded in China’s LeadingEconomic Indicators and Begin Re-Positioning Assets to Exploit an Unraveling of theChinese Economy
PIVOT CAPITAL MANAGEMENT
An influential research report was released by Pivot Capital Management in August of 2009,entitled
“China’s Investment Boom: the Great Leap into the Unknown.”
The monograph presents a detailed analysis of the nature and dynamics of China’s economic growth andconcludes that continued GDP growth is largely the product of unprecedented and unsustainablecapital investment.
[…] we believe the coming slowdown in China has the potential to be a similar watershed event for world markets as the reversal of the U.S. subprime and housing boom. The ramifications will be far-reaching across most asset classes,and will present major opportunities to exploit.
Pivot offers three principal reasons for their perspective on China’s pending economic downturn:1. China’s expansion cycle has already greatly surpassed all prior global capitalinvestment cycles;2. Recent economic growth is not sustainable and is predominantly the result of massive fiscal stimulus, concomitant with a surge in the growth of credit, none of which is sustainable; and3. China has substantial overcapacity in virtually every industrial manufacturing andinfrastructure sector, causing declining marginal returns on investment.Pivot’s report entailed a comprehensive review and analysis of the structural composition of China’s economy and identified significant trends which, as noted above, reveal an unsustainableeconomic expansion driven largely by capital spending and expansion of credit. A survey of thesalient points is presented below.
See research report by Pivot Capital Management entitled,
“China’s Investment Boom: the Great Leap into theUnknown.”
(August 2009). The report is accessible on the world wide web at:http://www.scribd.com/doc/21544021/PIVOT-CAPITAL-MANAGEMENT-China-s-Investment-Boom-the-Great-Leap-Into-the-Unknown Pivot’s updated report entitled,
“China’s Investment Boom: on the Edge”
(September 2011) is accessible at:http://www.scribd.com/doc/75058489/PGVF-2011-China-Investment-Boom-on-the-Edge The more recent report provides evidence revealing the continued deterioration of economic fundamentals in China.