China Inflation Blows Ahead Of Whisper (CYB, FXI)

For the last couple of months, the whisper numbers ahead of Chinese CPI releases were dead on. This time, not so much.

We expected 4.0% inflation in China based on all the news that was flowing through from Beijing. It seemed like a logical number — and lately the whispers have been as reliable as outright leaks.

But this time around, inflation actually came in at 4.8% on an annualized basis, overshooting the whisper by a mile.

That tells me that we all need to reassess our expectations on China.

Beijing may not be able to slow down the tightening process for a little while yet. Folks had already been wondering whether rates have gone too far, but given these numbers, there seems to be at least a bit of room left to go.

Once again, look at food prices: up 11% on an annualized basis. This is why Beijing needs to take action. If inflation continues like this, the Chinese people are going to need help putting food on the table.

If not for Japan’s sad news, this would probably have been the excuse traders use to send the markets lower today. It is not especially good for China and reveals that the rosy “Goldilocks” view may be wearing thin.

Not great for funds like iShares FTSE China 25 Index ETF (NYSE:FXI) but ultimately a positive for the yuan, one way or another — you can trade that side of the story via funds like the WisdomTree Dreyfus Chinese Yuan ETF (NYSE:CYB).

Written By Tim Seymour From Emerging Money

Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.

About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.

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