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Tim Bond: stranded China assets could be a hazard

by Dylan Lobo on Apr 09, 2014 at 07:48

Tim Bond: stranded China assets could be a hazard

Odey Asset Management's Tim Bond is concerned that 'stranded' China assets could become a 'hazard'.  

Bond (pictured), who runs the long-short global macro Odyssey  fund for Odey, said China faces a very delicate balancing act as it attempts to reshape its economy.  

'China is trying to move to a service and consumption led model,' Bond explained in an interview with Killik.

'The move away from an old capital intensive model leaves what we regard as stranded assets, which not only no longer have a business rationale - half of the steel industry may close - as the rate of investment in infrastructure slows down but also leaves their financial liabilities behind.'

He added: 'We've got that bit of destruction to go through and that's a very difficult process to manage if you want to keep growth at fairly decent pace.

'The moment you allow growth to start slowing than the process of unwinding the liabilities becomes much harder and difficult.'

US conundrum

Bond's quantitative screening models also suggest US economic growth could be strong this year, doubling its return in 2013. However, he does not necessarily think this is a good thing for the nation's stockmarket.

He believes the best way to run US exposure is through the exploitation of interest rate movements, which he believes could move higher sooner than consensus opinion anticipates.

'[The trade] we are using is interest rates - we are saying the "Fed is going to be tightening earlier than expected" and we may move that trade by saying the "Fed will tighten rates faster than expected".'

Bond said any decision would be based on the US unemployment rate.

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