China’s credit crunch buffets Berlin; 15 per cent to 20 per cent of German Dax companies’ earnings are China related

July 10, 2013 Leave a comment

July 9, 2013 6:58 pm

China’s credit crunch buffets Berlin

By Ralph Atkins

Germany was the rock of stability during the eurozone crisis but it is being seriously buffeted by the economic slowdown in China. German shares have dropped much more than the European average since June 19. That was when the US Federal Reserve confirmed it wanted to scale back its asset purchases – but also when China’s credit crunch sprang to global attention, heightening worries about how Beijing was applying the economic brakes. There was more bad news yesterday when the International Monetary Fund revised down forecastsfor Chinese growth this year and next. Deutsche Bank estimates the fall in German shipments to China in the first three months of this year compared with the same period in 2012 was already equivalent to 0.5 per cent of German gross domestic product.German companies, which have seen imports into China decelerating more than Chinese imports overall, are exposed because of their focus on investment goods and luxury cars. The risk is that Beijing damps exceptional levels of investment without stimulating consumption, creating a double whammy for Germany. Even if consumption picks up, Chinese drivers may switch to less ostentatious cars.

Some 15 per cent to 20 per cent of German Dax companies’ earnings are China related. German share prices need not move in step with export prospects; companies with significant local production could fare better than others. But investors appear to have taken their cue. German equities saw the heaviest selling pressure among European countries in June, according to flows data published by UBS.

Another problem for eurozone policy makers? Not entirely. The eurozone countries least directly affected by China’s slowdown include crisis-hit southern “periphery” states such as Spain. If the economic news is universally bleak it is easier for the European Central Bank to justify bolder action.

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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