Top Emerging Markets
Advice and Insights
About Asia Services
Resources & Tools
Most Popular
Sign Up Now!
First Name
Last Name
Email Address
email print bookmark this page

Three Ways to Prepare for the Yearend Rally

Robert Hsu, September 08, 2009

In this Issue:

After falling 23% in August, the Chinese stock markets are moving back up. For the past six days, China's A-Share stock market in Shanghai has rallied nearly 10%. During that same time frame, the S&P 500 has traded about flat.

Given this recent action, I laid out three scenarios for my China Strategy subscribers in last week's update…

Scenario #1: Chinese stocks will stabilize, while the U.S. market consolidates.

Scenario #2: U.S. and Chinese stocks will continue to correct over the next six weeks.

Scenario #3: The markets will surprise and rally.

With the next six weeks a seasonally weak time for the U.S. markets, I find Scenario 3 the least likely option. But, considering, market action over the past week, I think that Scenario 1 is the most viable option at this time.

Here's why I think this will play out over the next six weeks: Global stock markets have experienced a huge run since early March -- the S&P500 rallied 50%, Russia's RTSI jumped 72% and India's Sensex surged 96%.

Yet, China's market is the only one to consolidate some of these gains so far. After a 64% run from early March to early August, the Shanghai index corrected 23%. The Shanghai index is now up 36% since March 9 and nearly 61% year to date. Because of this, I think that it may well be the first to bounce back.

And that's exactly what we've been seeing play out in the past few trading sessions. China's A-Share stock market has outperformed most global stock markets with its 10% gain. As a result, many Chinese companies have watched their shares trek nicely higher in September so far. Just take a look:

Plus, we must consider that China's policymakers are doing everything in their power to support the Chinese stock market right now. The country will be celebrating the 60th anniversary of the People's Republic this fall, and the Chinese government wants a positive stock market going into those festivities.

That's why Chinese regulators made comments about supporting the Chinese markets last week, ultimately boosting investors' confidence and sending the Shanghai market on its recent 10% tear.

Given this, I'm sure you're wondering what the next course of action should be. Well, as I told my China Strategy subscribers, I think it's vital to stay proactive -- especially when you consider that we might be facing an incredible buying opportunity this month as other global stock markets consolidate their gains.

So it's time to start preparing now! Let me guide you to the best ways to profit from the yearend rallies I'm anticipating -- join China Strategy.

Sponsored Links

Sign up for Robert's FREE Newsletter

Robert Hsu

Asia Insider is your free guide to profiting in ALL of Asia!

Sign Up for Asia Edge
Sign Up for China Strategy
Sign Up for Inside China Dispatch