The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
) -More than a year ago Jim Chanos raised questions about China's enormous real estate and construction investments and stated that he is shorting China's real estate bubble. "Bubbles are best identified by credit excesses, not valuation excesses," he said on CNBC, adding, "And there's no bigger credit excess than in China."
Chanos didn't specifically lay out how he was shorting this bubble. Foreigners aren't allowed to invest in stocks listed inside China. Chanos implied that he was focusing on companies that sell cement, glass, copper, steel and iron ore to China's booming construction and infrastructure industry. Insider Monkey, your source for free insider trading data, investigated several indirect ways of shorting China's real estate bubble. Here are seven ways of shorting China's real estate bubble.
1. Shorting commodity companies that directly benefit from Chinese demand
BHP Billiton has been thriving on China's iron-ore demand over past few years. Around half of Brazil's and Australia's iron-ore production have been shipped to China during the past year.
(VALE - Get Report)
(BTU - Get Report)
(FCX - Get Report)
(PKX - Get Report)
are among the other companies that benefit from the China effect.
Last month Chanos also disclosed that he is short integrated oil companies such as
(XOM - Get Report)
Royal Dutch Shell
. Shorting oil producers doesn't seem to be an effective way of gaining some short China exposure though. Legendary investor George Soros has a large Petrobras position, even though he is short emerging markets.
2. Shorting Commodity ETFs
Another alternative to shorting commodity produces is shorting commodies through ETFs. We can short oil directly by selling
US Oil Fund
Crude Oil Total Return ETN
PowerShares DB Crude Oil Long ETN
United States 12 Month Oil Fund
US Gasoline ETF
United States Brent Oil Fund
DB Oil ETF
US Natural Gas ETF
Heating Oil ETF
We can also short sell base metal ETFs such as
Global X Copper Miners ETF
Global Copper Index ETF
iPath DJ-AIG Copper Total Return ETN
Alternatively we can short
US Commodity Index ETF
ProShares Trust Short Basic Materials
to build a short position in basic materials.
We should warn the readers that this is not a fool-proof way of profiting from a possible Chinese real estate bubble though. There are several prominent hedge fund managers who consider commodities as a hedge against a possible US dollar depreciation. Jim Rogers is extremely bullish about commodities claiming that commodities will go up regardless of what happens in the U.S. and World economy.