China Market Strategy:Sweet and Sour Hog Cycle

Summary: Consensus seeks growth signals in the strength in hog cycle, iron ore, rebar and property prices. Yet these lagging indicators will peak in the coming months - they are confirmations, not auguries. Rebar has already entered its annual de-stocking cycle. Our proprietary indicators of growth prospects and inflation are also peaking. With heavy loads of inventory, China’s re-stocking cycle is becoming shorter, and its resultant growth less sustainable. Fundamentals can improve in the near term before peaking. But the rally is now stretched, and risks are escalating.