$Direxion Daily FTSE China Bear 3X Shares(YANG)$ While Chinese stocks are very undervalued right now, investors must also find the economic growth engine for China to recover. As the US cuts interest rates, the demand of RMB pushes up their currency strength, possibly negating the impact of any export benefit due to China’s deflationary environment.
Moreover, with many trade partners wary of China’s alleged export dumping policies, China will struggle to find an economic growth sector to replace the gap left by their crumbling construction industry.
The fact that 70% of stored family wealth is in the deflated property sector, and with 17.1% of youth unemployment, and a pension issue, China will find it difficult to stoke domestic consumption as people aren’t willing to spend when social net is low, stored savings and wealth is decimated by failed properties, and the squeezed out middle class families having to fork out more money to support their elderly due to an ageing population and a limited pension system.
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