Hedge fund GMO warns on China real estate bubble

China’s housing market is experiencing the “mother” of all bubbles, which will drag down everything from Australian mining firms to European luxury good makers when it pops, Reuters reported, quoting a prediction by Boston-based hedge fund Grantham, Mayo, Van Otterloo & Co. GMO, which oversees US$97 billion in assets, is betting that shares of Chinese real-estate developers, construction companies and cement products will decline, said Peter Chiappinelli, a portfolio strategist for asset allocation at the fund.  GMO is also betting against Australian mining companies, German carmaker BMW (BMW.FRA, ETR) and British luxury handbag maker Burberry Group (BRBY.LON), all of which are “very exposed” to a China slowdown, he said. Lisa Emsbo-Mattingly, the director of research in the global asset allocation division of Fidelity Asset Management, said it is “very difficult” to have an optimistic view on China because the housing price drop will affect banks as the euro zone debt crisis undermines Chinese exports. “All bubbles pop eventually,” Chiappinelli said.