Chatfeild-Roberts warns on China and commodities

Jupiter CIO John Chatfeild-Roberts and his Merlin multi-manager team have said clear warning signs are beginning to emerge on Chinese growth prospects as well as the outlook for natural resources.

In their latest update, Chatfeild-Roberts and his Merlin multi-manager team said during their summer visit to Japan they found a host of companies saying demand from China was weaker than they had anticipated.

"The message that we received was very clear - the Chinese economy is slowing down," said Chatfeild-Roberts.

On Tuesday Chinese GDP data for the third quarter of 2011 came in slightly below expectations at 9.1%, though analysts remain divided on whether the world's second largest economy is set for a soft landing or something more serious following a series of monetary tightening measures.

Chatfeild-Roberts also highlighted comments from Rio Tinto's CEO that some customers were asking for metal shipments to be delayed as a warning over the outlook for natural resources.

"This was a clear signal to our team that the commodities sector is in dangerous waters and is one best avoided until economic leading indicators have picked up," he said.

Chatfeild-Roberts nonetheless suggested demographic changes could eventually enable emerging markets to prosper regardless of the "utterly depressing" macro picture in the developed world.

"Europe may be in crisis, but we must remember that there is a rapidly growing middle class in the emerging markets who have the ability to spend. There is a good chance that when they do start to spend, we might witness a genuine de-coupling of the two speed global economy," he said.

Angus Tulloch's First State Asia Pacific Leaders fund remains one of the Merlin team's favoured holdings, although their exposure to far east equities fell slightly in September.

The team have been allowing cash positions to creep up again in September in preparation for the point at which markets will "ultimately over-react to negative newsflow, just before the tide then turns".