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You Can't Afford to Ignore China Again

Robert Hsu, Editor

Global Outlook: Why You Can't Afford to Ignore China

China Market Outlook

Market pundits around the globe are shouting "China bubble!"

Since the beginning of the year until early August, China's A-Share stock market in Shanghai skyrocketed more than 80%. Then, the Shanghai market dropped more than 20% throughout the rest of August. And that's when the comments started… "The markets ran up too far, too fast…" "China is now facing another bear market…"

While I'm not going to deny that Chinese shares ran up rather quickly this year, I don't think that the recent pullback is the start of another bear market. Rather, it's a consolidation period. Here's what you need to consider: The Shanghai stock market is sitting just under 30 which is below its historic PE average. And given low interest rates and robust earnings growth, this valuation is far from expensive.

In fact, its current PE ration is about half of peak valuations in 2007. And that's reasonable for a high-growth, high-liquidity economy like China. That's why I expect the Chinese markets to consolidate for a while, and then resume their uptrend through the end of the year.  And this spells nothing but opportunity for savvy investors who know where to invest their money right now.

You see, in the current global and economic environment, fear just isn't an option–not if you're trying to make money.  Sure, it's a scary and tough out there right now–especially considering the massive amount of deleveraging in the past year -- U.S. banks admitted failure, filed for bankruptcy and collapsed under the weight of their bad mortgage bets, and other financial institutions around the world disclosed the same financial problems.

Huge Power Shift Underway

As the financial crisis continues to shakes out, we're going to see a huge shift in power–the world's financial power will no longer lie in the hands of debtors like the U.S., but rather in the hands of savers like China.

These debtor nations–which include the U.S., Europe, and even resource rich economies like Brazil, Canada, Australia and Russia–were caught with their hands in the cookie jars. Many of these nations spent extravagantly over the years–specifically during the commodities boom–amassing huge quantities of debt. And as the financial crisis unwound in 2008, these highly leveraged economies were forced to massively deleverage and were hit the hardest.

On the other hand, minimally leveraged countries like China have been more insulated from the crisis. That's because these countries and regions are flush with capital, and have provided safe havens for global capital during the recent financial turmoil. In fact, China–the world's largest saver nation now with more than $2 trillion in foreign reserves–hasn't needed to deleverage its financial system and undergo painful economic adjustments like the Western world. So while the U.S. and European nations face the most severe financial crisis since the Great Depression, business continues as usual in Beijing.

And while countries like the U.S. recently reported a one percent contraction in economic growth, countries like China continue to post robust economic growth despite the global recession and financial crisis.

There's no denying the fact that China is leading the global recovery.  After bottoming in the first quarter with 6.9% economic growth, China posted a whopping 7.9% GDP in the second quarter.
So what does this all mean for investors?

Simple.  China offers an economic safe harbor for investors who are wary of the banking crisis in U.S. and Europe. The key is knowing exactly where to invest–and that's where I come in.  Join my China Strategy service today, and I'll point you towards that best Chinese companies directly in line to profit as the country continues to post solid economic growth.

China Strategy

Miracle is a strong word, but it’s the right word to describe what’s happening today in China. As this once-great land modernizes and shifts to a market-driven economy, the staggering economic growth taking place there will continue for the foreseeable future. The profit potential for investors who truly understand what’s happening inside China is equally staggering.

That’s why Robert Hsu made it his mission to help you profit from China’s economic miracle. In his China Strategy service, you’ll receive a monthly issue, weekly updates and Flash Alerts to keep you abreast of everything that’s happening in domestic and foreign markets. With this service, Robert will help you profit by bringing you the real China—the China that he knows first hand by reading Chinese newspapers, visiting the country, and his on-the-ground network of analysts. He’ll also protect you from the risks that cost many unwary investors dearly, by providing you with specific buy and sell advice on only the best-positioned companies set to profit from the China Miracle.

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