Decrease Portfolio Exposure to Asia Growth: Brian Kelly
Stocks pulled back on Monday, and although the decline was modest, the catalyst has given some traders cause for concern.
China cut its GDP target for this year to 7.5 percent, which would represent the slowest economic growth in eight years.
The development triggered chatter that China’s decade-long run as the world's growth engine may be over — along with unprecedented demand for commodities and ultra-cheap labor and parts for manufacturers.
To make the situation all the more delicate Credit Suisse put out a note that said the commodity super-cycle underpinned by China had peaked.
How should you position now?
Trader Brian Kelly says don’t panic. “This doesn’t mean the world is over,” he says. Credit Suisse simply said the super-cycle had peaked not ended.
However, Kelly does suggests taking a hard look at your portfolio. "It's probably time to decrease exposure to anything that’s highly tethered to Asia growth."
“For me I sold EWA” he says. Decline in demand for commodities from China will hurt Australia. And he sold EWY . South Korea is a heavily export dependent economy.
In addition, Brian Kelly suggests watching the action in copper very closely. “It won’t take much of a demand decrease in copper to generate a surplus.”
Karen Finerman thinks these developments are likely negative for Yum Brands, which generates a sizable amount of sales from China. “I don’t think the story is over entirely,” she says, “but I’d take some off the table.”
Tim Seymour is on the other side of the trade.
“I don’t agree with Credit Suisse,” he says. “I think the commodities super-cycle continues to go forward. China has planned $900 billion in power grid construction over the next 5 years; $400 billion in subway and roadway construction. And they plan to spend significant amounts on housing."
What do you think? We want to know!
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Trader disclosure: On March 5, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Finerman is long (AAPL); Finerman is long (BAC); Finerman is long (JPM); Finerman is long (HPQ); Finerman is short (SPY); Finerman is short (IWM); Finerman is short (MDY); Kelly is long (QQQ) calls; Kelly is long (USG); Kelly is long (SPY); Kelly is long (SPY) Puts; Kelly is long (EWE); Kelly is long Mexican Peso; Kelly is long German Bunds; Kelly is short (EWY); Kelly is short Australian Dollar; Kelly is short New Zealand Dollar; Adami is long Citigroup; Adami is long (GS); Adami is long (INTC); Adami is long (AGU); Adami is long (MSFT); Adami is long (NUE); Adami is long (BTU); Nations is long (BAC); Nations is long (SPY)
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