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Another Huge Opportunity in Chinese Stocks

By Dr. Steve Sjuggerud
Monday, December 8, 2014

When China wants its stock market to go up, it goes up... A lot.
 
I've written that many times in my career... Because I've seen it happen many times. And investors who saw it happening each time made a lot of money.
 
Importantly, it's happening again today...
 
Two weeks ago I told you a few reasons why Chinese stocks could soar, thanks to the Chinese government.
 
One big reason is that China recently cut interest rates for the first time since 2012.
 
History shows these rare interest-rate cuts lead to big gains in Chinese stocks. Specifically, history shows that Chinese companies that trade in Hong Kong tend to soar when this happens.
 
The Hong Kong listed Chinese stocks – the Hang Seng China Enterprises Index, specifically – are down 47% since peaking in 2007.
 
The Chinese government has decided it's time to do something about that... And a rate cut is another tool to help boost the Chinese economy and stock prices.
 
You see, over the past 20 years, China has cut rates 13 other times. On average, those rate cuts led to 27% gains a year later in the Hang Seng China Enterprises Index. The table below has the full details...
 
China Cuts Rates
1-Year Return
5/31/1996
28.4%
8/31/1996
80.2%
12/31/1997
-44.9%
3/31/1998
-50.4%
7/31/1998
57.6%
6/30/1999
-29.6%
2/28/2002
15.1%
9/30/2008
34.6%
10/31/2008
98.5%
11/30/2008
84.3%
12/31/2008
65.8%
6/30/2012
1.6%
7/31/2012
4.2%
Average
26.6%
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Of the 13 rate cuts, only three led to negative one-year returns. Yes, those three were bad losses. But that's why we use stop losses.
 
The important thing is, Chinese stocks increase 77% of the time a year after rate cuts. And the average gain is 27%.
 
Again, these gains are NOT from the A-shares market I've written about recently. They're from Hong Kong-listed Chinese companies... the massive blue-chips in China.
 
You can easily buy this group of companies with the iShares China Large-Cap Fund (FXI). This fund holds multi-billion dollar Chinese companies like China Mobile and Bank of China. It's the Dow Jones of China.
 
You might not think massive companies like these can soar. But history says otherwise.
 
China just cut interest rates. And based on history, these companies have returned an average of 26% over the next year when that happens.
 
Check out shares of FXI if you want to make the trade.
 
Good investing,
 
Steve




Further Reading:

The next time you want to diversify some of your money, Steve suggests investing in China's currency... "China's currency has appreciated steadily versus the U.S. dollar for the past decade," Steve says. And he expects this trend to continue. Learn one of the simplest ways to hold the Chinese yuan here.
 
Another area Steve likes right now is the biotech sector. "It has been 15 years since we've seen a triple-digit year in biotech stocks," he writes. "We're due for a great run in biotech. And right now, I believe we're in the middle of it." Find out why right here.

Market Notes


NEW HIGHS OF NOTE LAST WEEK
 
W.R. Berkley (WRB)… insurance
Allstate (ALL)... insurance
Berkshire Hathaway (BRK)... Warren Buffett's holding company
Wells Fargo (WFC)… America's largest bank
FedEx (FDX)... shipping
UPS (UPS)… shipping
Toyota Motors (TM)… cars
AutoZone (AZO)… car parts
3M (MMM)… manufacturing
Southwest Airlines (LUV)... airline
Home Depot (HD)… home improvement
Lowe's (LOW)… home improvement
Automatic Data Processing (ADP)… payroll processing
Cisco (CSCO)… Big Cheap Tech
Intel (INTC)… Big Cheap Tech
Sony (SNE)… electronics
Visa (V)... credit cards
MasterCard (MA)… credit cards
Nike (NKE)... athletic apparel
Target (TGT)... retail
Disney (DIS)… entertainment
Eli Lilly (LLY)… Big Pharma
Johnson & Johnson (JNJ)… Big Pharma
Medtronic (MDT)... medical devices
Express Scripts (ESRX)… pharmacy benefit manager
Celgene (CELG)… biotech
Amgen (AMGN)… biotech
Altria (MO)… cigarettes
Procter & Gamble (PG)… basics
Colgate-Palmolive (CL)… basics
PepsiCo (PEP)… snacks and beverages
Starbucks (SBUX)… expensive coffee
Dollar General (DG)… dollar stores
Northrop Grumman (NOC)… "offense" contractor
Raytheon (RTN)… "offense" contractors
Symantec (SYMC)… cyber security

NEW LOWS OF NOTE LAST WEEK

Halliburton (HAL)… oil services
SeaDrill (SDRL)… offshore drilling
Transocean (RIG)… offshore drilling
Continental Resources (CLR)… oil & gas producer
Range Resources (RRC)… oil & gas producer
Vale (VALE)… diversified miner
SeaWorld (SEAS)… entertainment
Wynn Resorts (WYNN)… casinos

premium teaser

Crisis prices... without a crisis...
 
There's another incredible investment opportunity, right now, in China's backyard...
 

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