Via: Source
Taking one big step towards answering a question that many have been batting around for a week or two now, billionaire investor Bill Ackman, head of Pershing Square Capital, said on Wednesday that he considers China a bigger global threat than Greece is, and that the nation’s stock markets scare him in their current state. Let’s dive in and take a look at exactly what was said, and why.
No bulls in this China shop. — Via LinkedIn
“China is a bigger threat by far,” Mr. Ackman was quoted as saying at CNBC’s annual Delivering Alpha conference yesterday. As noted by many recent commentators, including a recent article on this site, the Chinese stock market has been on quite the wild ride as of late. Indeed, since June 12th, almost $4 trillion worth of value has been erased from the Chinese equities indexes, as investors who were double- or triple-leveraged looked for ways to become more liquid. Other issues noted by Mr. Ackman included an overall lack of transparency, and the reliability of its economic statistics.
However, as has been noted by other executives, such as CEO of Morgan Stanley Asset Management, Mary Erdoes, the Chinese economy as a whole does not correlate with this plunge in the markets, as they have turned in roughly 7% GDP growth every year for the past 25. Even Mr. Ackman himself admitted its hard to see anything but a solid long-term future for China.
When comparing their economy to Greece in terms of a global instability threat, it is easy to see how China could represent a more existential threat. Their economy is so much larger, and so much more tightly engrained with other global economies than Greece’s is, that although they are more stable, a negative turn could have more far-reaching effects.
What do you think? Do both economies represent global threats to market stability? Or do neither?
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