Global investment poll finds China losing favor, U.S. gaining ground

Fears of a market bubble in China have tempered enthusiasm for investments in that country even as confidence in U.S. markets has risen, according to a Bloomberg News survey.

In just three months, sentiment toward the U.S. investment climate has flipped. Almost six out of 10 respondents polled Tuesday said they were optimistic about the United States, while a majority had been pessimistic in an October poll. A nine-month rally in U.S. stocks has pushed up the Standard & Poor's 500-stock index 61 percent through Friday's close.

The strength of that sentiment faced an early test last week with a steep sell-off. The poll was conducted the day before U.S. stocks began their biggest three-day tumble since March. The decline was fueled in part by President Obama's call on Thursday to limit the size and trading activities of financial institutions. A further decline came Friday, after several key Senate Democrats wavered in their support of a second term for Federal Reserve Chairman Ben S. Bernanke.

The U.S. financial experts in the poll saw the Obama administration's proposed policies as having negative consequences. About 77 percent said Obama is too anti-business, and a majority said tax rates on bonuses were too high. Yet they are more bullish on the future than they were six months ago.

Concerns about high unemployment and chronic budget deficits also persist, but "there's a sense here that the economy generally is getting better," said Ann Selzer, president of Selzer & Co., an Iowa-based polling firm that conducted the survey. And "it's in marked contrast to tepid attitudes only three months ago," she said.

The number of U.S. investors who see the American economy improving has marched steadily upward over two quarterly polls, more than doubling since July.

The quarterly Bloomberg Global Poll of investors, traders and analysts in six continents was based on interviews with a random sample of 873 Bloomberg News subscribers, representing decision-makers in markets, finance and economics. The poll has a margin of error of plus or minus 3.3 percentage points.

A tie with Brazil

China, the world's fastest-growing major economy, is viewed as a bubble by 62 percent of the respondents. About one-third said China offered the best investment opportunities over the coming year, almost tied for first place with the United States and Brazil, though down sharply from October, when 44 percent ranked China best.

This time, nearly three of 10 investors said China posed the greatest downside risk, ranking it the second-riskiest market after the European Union.

"We think that China is producing and is building up inventories at a rate that no other country or region can follow at the moment," said poll respondent Alcibiades Angelakis, head of marketing and research at Epic Investments in Athens. "This cannot continue for a long time, and we fear that in the second half of this year things will slow down."

Concerns over a potential bubble in China have been mounting recently. Hedge fund-investor James Chanos, president and founder of New York-based Kynikos Associates, one of the first investors to foretell the 2001 collapse of Houston-based energy company Enron, has said China looks like "Dubai times 1,000 -- or worse."

Chinese lending limits

After new bank lending in China last year surged to a record, banking regulator Liu Mingkang said he has told some banks to limit lending and restrict overall credit growth.