The nay sayers don't stop

Jim Chanos

China is on “a bigger and faster treadmill” than ever as property sales slow, said Jim Chanos, the hedge-fund manager who’s shorting banking stocks on a bet the market will crash.

“The Chinese are beginning to realize that property prices can go down as well as up and this is going to be a very, very troubling development for the Chinese property market,” Chanos, president and founder of $6 billion hedge fund Kynikos Associates Ltd., said in a Bloomberg Television interview from Singapore with Susan Li today.

Chanos has forecast since at least February 2010 that the property market will slump, saying that China is Dubai times a thousand and on a “treadmill to hell” because of its reliance on real estate for growth. Home prices rose in fewer than half of 70 Chinese cities in a nationwide survey in September as sales eased after the government restricted home sales and imposed curbs on some mortgages in an attempt to cool prices.

“All the way down, there were 30 percent and 40 percent rallies from new lows, yet things kept deteriorating,” Chanos said, adding that he’s nowhere near covering his short positions in China as “the property slowdown has just started in the third quarter. Stocks are going to go up and down like yoyos. But we are keeping an eye on the fundamentals and they have just started to deteriorate.”

Property Stocks Climb

The gauge tracking property stocks on the Shanghai Composite Index climbed 3.5 percent at the close, the most in two months.

Real estate transactions in the past two months, in the so- called tier-one, two and three cities the firm tracks are down 40 percent to 60 percent year on year, said Chanos.

“The property slowdown or worse has started,” he said. “The question is how it’s resolved.”

Chanos is on a trip to Asia, including Hong Kong and Singapore. He said trips to visit Shanghai and Beijing are “probably some ways away” because he has analysts going to China all the time.

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I guess one has to watch China real estate stocks. The Chinese stock market has just completed double bottom with their Premier giving some hint of controlled slow down. The real estate slowdown story is for sure. Back to whip saws !