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How to Trade China's Slowing Growth

Friday, 23 Mar 2012 | 8:39 PM ET
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The red-hot Chinese economy is slowing, and the government is pushing back. This strategist has a way to play the tension.

China's economy is slowing so much, the country has essentially ordered its citizens to 'shop till you drop' by designating National Consumption Month. Gina Sanchez, economic director of equity and asset allocation at Roubini Global Economics, is skeptical.

Sanchez expects a push for consumers to spend to simply accelerate consumption rather than increase it overall. In addition, she told CNBC's Melissa Lee, "we think that falling property prices are going to impact the wealthy and that's going to impact National Shopping Month." Still, she does anticipate a certain inflationary impact from the spending push - and of course inflation tends to be positive for a currency.

Rebecca Patterson, chief markets strategist for J.P. Morgan Asset Management, Institutional, agrees, and points out that as far as China is concerned, "you can play it through a lot of other liquid markets."

Patterson has looked at several currencies for patterns parallel to China's, and she has found a winner: the Australian dollar, at 88 percent correlation.

She thinks that the Chinese will force economic growth higher, but she also believes that in the very near term, the Australian dollar could weaken further over concerns about China's economic outlook. Patterson wants to buy the Aussie against the dollar around a technical support level at 1.0100, setting a stop at 0.9875 and a target of 1.0600.

"If you hold this position over time, you make money on the interest rate differentials as well," she she points out.

China's Slowing Pains
Can China spend its way out of trouble? The country introduces National Consumption Month to its people, with CNBC's Melissa Lee and the Money In Motion traders. Gina Sanchez, Roubini Global Economics, looks at the slowdown in China.

You can watch the discussion on this video.

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