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China 'Triple Bubble' Is Biggest Risk To The World

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China 'Triple Bubble' Is Biggest Risk To The World

In a new report, Credit Suisse analyst Andrew Garthwaite warns global investments of the trouble that Credit Suisse sees brewing in China. According to the report, the world could be witnessing the simultaneous bursting of three of the largest financial bubbles in history, based on the most recent data out of China.

The Triple Bubble

According to the report, China has formed the third-largest credit bubble, the largest investment bubble and the second-largest real estate bubble of all time. China's recent high deflation rates, falling housing prices, forex outflows, slumping deposit growth and weak job offer-to-application ratio are all at or near historical extremes and serve as signs that the Chinese economy could be in real trouble.

Despite some signs of near-term stabilization, Garthwaite projects that a 15 percent drop in Chinese housing prices or a deposit growth rate decline to zero would produce a China GDP growth rate below 3.0 percent.

Related Link: China's Economy Is Growing, So Why Are Markets Struggling?

European Autos Will Suffer

Credit Suisse sees the turmoil in China weighing heavily on European auto makers, who generate 41 percent of their profits from China.

"We stay overweight of auto components and think Continental European car sales will rise by c20% over the next two years; thus, we remain positive on French and Italian autos, but underweight German OEMs," Garthwaite explained.

Other China Plays

Overall, Credit Suisse is bearish on many China-exposed investments. The report specifically mentions that luxury brands (Burberry Group (OTC: BURBY), LVMH Moet Hennessey Louis Vuitton (OTC: LVMUY)), capital goods (SKF (OTC: SKFRY), Sandvik (OTC: SDVKY)), bulk chemical companies (BASF (OTC: BASFY)), testing companies, the Australian dollar and Australian equities all have particularly high exposure to China.

Latest Ratings for BURBY

DateFirmActionFromTo
Jun 2019Goldman SachsUpgradesSellNeutral
Apr 2019Bank of AmericaDowngradesNeutralUnderperform
Mar 2019Goldman SachsDowngradesNeutralSell

View More Analyst Ratings for BURBY
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Posted-In: Andrew Garthwaite China Credit SuisseAnalyst Color Forex Markets Analyst Ratings Best of Benzinga

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