TradingSpark

Chinese Stock Market Bottoms: What Should U.S. Investors Do?

China is a massive manufacturer/exporter. It produces far more for export than it can replace with domestic demand in the near term. The current rally - for China- is a last 'hurrah' before another very serious gap down. The government is reacting as fast as it can with interest rate cuts (that just grow and reveal increasing concern), a massive stimulus package that'll take time to permeate (think about how long it really takes to get a major infrastructure project underway), and there are all sorts of ruminations over currency devaluations (with what appears to be much government contradiction). All of the above show serious concern for the economy. Look at the numbers - I dont have them on hand - but exports are not going in the right direction as reported on the front page of the SCMP today! The government should be worried, very worried, about an impending 'trade shock' next year. Buying the FXI might be a good short-term play on the current bear rally, but I'd be hedging and accumulating the FXP given the current situation. (I also concur with one of the earlier posters - read M. Pettis' blog mpettis.com/ for an informed view on China's financial markets). Happy trading to all!