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Europe Is a Mess But China Is Scarier: Fund Manager


There's certainly a long list of scary things happening in the world right now that are keeping investors on edge and up at night. But for fund manager Scott Mullinix, who co-manages the Nuveen Large Cap Growth Opportunities Fund (FRGWX), China sits at the top of his list.

"The signs that we're seeing out of China right now are quite negative," he says in the attached video. While he believes the market understands the regional risks in Europe, the global fallout from just one misstep by China's relatively new economic planners "would have major ramifications for world GDP."

While the IMF now says China should be able to pull off a so-called soft landing, it also warns that there are still significant downside risks to the world's second largest economy. Risks that need only see Chinese growth slip to "4 to 5 percent" from 7.6% currently, Mullinix says, and the impact "would be very bad."

Of course, managing any large economy through a crisis is tenuous, but in China's case, its over-reliance on infrastructure spending and housing are seen as the major threats. In fact, Mullinix says housing accounted for 9% of Chinese GDP last year compared to just 6% in the U.S. at the height of our housing bubble.
Will the Chinese get it right and 'stick the landing' as they say in gymnastics? Who knows, but Scott Mullinix isn't waiting around to find out.

"We have sold our holdings with direct exposure to China," he says, including casino stocks and Baidu (BIDU), and pared back positions like Yum! Brands (YUM) and Coach (COH), which have significant parts of their business related to China.

Asked what needs to occur to restore his faith and return his money to that part of the world, Mullinix says he simply needs to see "meaningful stimulus that moves PMI back above 50."