Booking 126.5% Profits in China — and a Bet on India’s Momentum

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

With such sharp moves, it is time to take some quick profits on last week’s option recommendations. Your $360 December calls in Baidu (BPJLL) now are up 126.51%. Sell half of your options here to lock in your gains. Also, I recommend that you book half of your profits on your December $15 calls in the iShares MSCI Hong Kong Index (EWHLK). That’s a quick 29.47% profit in five short trading days.

This week’s Global Bull Market Alert is yet another pure momentum play on emerging markets, specifically on one of the roaring BRIC economies. You already have bets on Brazil (GFA) Russia (MTL) and China (TAO). It’s now time to complete the picture with this week’s pick from India, ICICI Bank Ltd. (IBN).

Here’s why I think ICICI Bank will be a money maker for you over the next few weeks.

First, the Indian market is a huge momentum play. Indian American Depository Receipts (ADRs) listed on the New York Stock Exchange gained $2.37 billion just last week alone. And ICICI Bank itself has also outperformed the broader Indian market by a wide margin. Although ICICI Bank has already had a strong run this year, I believe there is solid upside left in the stock between now and the end of the year.

Second, after suffering in the global economic downturn, ICICI Bank appears to have firmly turned the corner. The bank’s net profit rose to 8.78 billion Indian Rupees ($182 million) in its fiscal first quarter ended in June. That 20.6% rise trounced analysts’ expectations of 7.7 billion rupees ($160 million). You can expect a similar upside surprise when ICICI bank announces third quarter results in the coming weeks. ICICI’s profits, as calculated in U.S. dollars, will also get a nice boost from the rising value of the appreciating Rupee.

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So buy ICICI Bank at market today and place your stop at $34.50. For potentially even bigger gains, I recommend the January $40 calls (ITZAN).

Portfolio Update

The iShares MSCI BRIC Index ETF (BKF) jumped 7.46% to close the week at a high for the year of $43.91. With all of the BRICs on fire, BKF remains a BUY. Raise your stop to $39.50.

Baidu, Inc. (BIDU) soared over $13.8% last week, closing at $427.07. With Citigroup raising its target price to $480 for the “Chinese Google,” this institutional favorite remains a BUY. Raise your stop to $370.

iShares MSCI Chile Investable Market Index (ECH) hit a high for the year of $48.30 last week, as Chile’s blue-chip Ipsa index closed at a two-year high Friday. This relatively low volatility pick is a BUY.

The iShares MSCI Israel Cap Invest Mkt Index (EIS) rose 5% last week and closed above the $50 level for the first time this year. EIS remains a BUY. Raise your stop to $46.00

The iShares MSCI Hong Kong Index (EWH) rose 4.2% last week as Hong Kong recovered from earlier falls. Hong Kong stays a BUY. Raise your stop to $14.50.

SPDR S&P Emerging Markets Small Cap ETF (EWX) jumped another 4.8% last week. Continuing to outperform its large cap rivals, this emerging markets small cap bet remains a BUY. Raise your stop to $41.50.

First Trust ISE-Revere Natural Gas (FCG) soared 10.46% last week, as the price of natural gas recovered. FCG remains a BUY. Raise your stop to $15.00.

Gafisa S.A. (GFA) hit a yearly high of $32.18, before falling back slightly. With the stock up 5.4% last week, Gafisa remains a BUY. Raise your stop to $27.00.

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Mechel OAO (MTL) is behaving as advertised, jumping 14.36% over the week. With the stock still considerably off its previous highs, this volatile Russian bet remains a BUY. Raise your stop to $15.30.

PowerShares Financial Preferred (PGF) was a laggard this week, rising only 2.7%. This high-yielding play remains a BUY.

Claymore/AlphaShares China Real Estate ETF (TAO) rose 6.86% as Chinese markets regained their footing. With this ETF breaking out to record highs, I am moving TAO back to a BUY.

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