Just now received an interesting economist forecast relating to...

Just now received an interesting economist forecast relating to China. To quote "Potential Chinese recovery story not fully factored into metal prices".

* There are significant risks that through quick and
effective government stimulus, the Chinese economy
may post upside growth surprises despite the obvious
slowdown in export demand.

* Indeed, this looks to be well priced into equity
markets, with the Shanghai A Index +25% so far in
2009.

* Commodity prices however have so far been largely
unmoved by the prospect, but if the bounce does
occur it should only be a matter of time until metals
rally - and there is plenty of upside.

Ben Levett wrote on 10 Feb (search "commodity
spin") that if any country can prove the now debunked
decoupling story true, it is likely to be China. This is
because, although it is increasingly apparent that
global demand for exports will remain soft through
2009, the Chinese government is well positioned
(politically and fiscally) to execute quick and effective
stimulus. This could allow production to bounce from
current lows despite likely export weakness.

However, we think three factors could see metal
prices rise sharply in H1 '09: 1. production and
investment has be reduced quickly and substantially;
2. given China's large global share of
consumption/imports of metals, a rise in domestic
production will impact prices materially; and 3. the
trade is not crowded - following the pain of H2 '08
there are few remaining speculative long commodity
positions - indeed CFTC data shows net shorts in
copper since mid-08, now at 25k+.

In terms of conspiracy theories that this website seems to breed daily, maybe the Chinese move into Australian resources is critical to their expected growth from internal demand, as opposed to exports that was the norm over the past 10+ years.

This is only one report and I make no mention of support or otherwise. It crossed my email late this afternoon and I am publishing it as so...

It came from Forecast - Forecastweb.com (Web, 18 Feb 2009)