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James Chanos and Jim Rogers are two of the most famous investors in the world. If you want to see them get into a fierce debate, put them in the same room and ask them the following question: is China crashing?

Chanos became a celebrity in the financial world after he made a fortune shorting shares of Enron. Today, this savvy hedge fund manager has another big short position: He’s betting against China. Other investors believe this fear of China crashing is overblown and overhyped.

For example, investment legend Jim Rogers thinks there will be no recession in China. For Rogers, the economy is just temporarily slowing down because the Chinese government implemented measures to cool down the housing market.

These are two very smart guys. So who should you listen to? Chanos or Rogers?

So far, Chanos has been right. The chart below shows the big downtrend in the Shanghai stock market. But as I told you a few weeks ago here, a lot of bad news has already been priced in. In terms of P/E ratio, Chinese stocks are trading at the same level they were trading in 2008, after the stock market crash.

Shanghai Stock Market Remains in a Downtrend

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Before you jump in, it’s important to wait until the trend turns, or you run the risk of catching a falling knife.

So keep an eye on this downtrend line. Once the price closes above that line, it will be an indication the trend is turning.


Evaldo Albuquerque
Senior Analyst

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