The prophets of doom have recently shifted their attention to China, predicting a sharp slowdown in its economic expansion. Even reputable think tanks like Goldman Sachs believe that an economic downturn in China is inevitable.
The bank slashed its earnings outlook for the MSCI index to zero growth for the year, down from 4% previously. MSCI China’s price target over the next 12 months is expected to decline to 81, down from 84. The index tumbled by more than 6% in July to 68.81.
A drop in economic indicators is largely attributed to the crisis in the property market. Many homebuyers in different provinces stopped mortgage payments due to the construction delays for the apartments they had paid in advance. Local property developers are desperately trying to stay afloat as they are lacking money. This situation adversely affects banks and holders of mortgage bonds secured by loans, including large corporations and funds.
