Macro vs micro is often a conundrum.

Consider this report from Deutsche issued yesterday. Page 20 begins "How to position for a China rebound". Basically it is a call to long copper and maybe punt on domestic thermal coal investment.

Elsewhere an examination of Chinese companies being fed (largely) by this export demand is less encouraging. Vernimmen did a nice round-up in November of 2,457 Shanghai quoted companies (91.7% of the market's capitalisation). Snap-shot by sector:

These 2,457 have annual turnover equivalent to the 25 largest European companies but of course have grown much faster - even over the last two years when they 'slowed' to 7% to 9% per annum instead of the habitual 20%.

However, margins have contracted sharply in the last decade, investment is down, working capital growth outstrips turnover growth, debt levels are up and 67% of firms do not earn their cost of capital. Overall, on most headline accounting ratios these firms do worse than tired old Europe. Except when it comes to growth.

Course, Shanghai has been hammered and price earnings valuations are relatively low (~11). That headline number is usually what makes the financial press in tandem with a 'growth' reference. But eleven times earnings for a market struggling to cover its cost of capital (plus the rest) is not eleven times earnings elsewhere.

On past performance look for a melt-up nonetheless.

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