Hendry builds huge short to profit from 'vulnerable' China

Eclectica founder Hugh Hendry has initiated a substantial short position in Japanese credit, on expectations of a sharp correction in the Chinese growth story.

The hedge fund manager has dismissed the notion the Chinese engine of growth is unstoppable and is looking to profit from taking protection on industrially cyclical Japanese corporate credit. While China has clearly been able to create strong GDP growth, Hendry says it has not demonstrated an ability to create wealth. “Over the past 30 years, the level of consumption as a percentage of GDP has almost halved and we are talking about consumption being 35% of the economy,” he said. “When you are not allocating capital according to profit, you tend to overbuild and get this malinvestme...