What China’s Bullish Move Means for Global Markets

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

The Bull Stampedes in the China Shop

This week’s market action was dominated by the Federal Reserve’s Federal Open Market Committee (FOMC) statement and the subsequent press conference by Fed Chair Janet Yellen. The key term “patient” was removed from the Fed’s statement, and that was the first step toward setting the table for the first interest rate hike in more than seven years.

The Fed also expressed a bit of concern about U.S. economic growth, and that actually caused traders to interpret the Fed statement as a bit more “dovish” than was previously thought. That means there won’t likely be a rate hike until at least the September FOMC meeting — and maybe even longer.

Now, while stocks in the United States enjoyed a strong week of Fed-induced upside, there was a much bigger bullish move this week in China. In fact, the bull is stampeding through the China shop right now, and that has been a decided trend since the beginning of the year.

The table here of the top 10 performing China ETFs in 2015 tells the tale of a bull in stampede mode.

Ticker Name YTD% Assets ($MLN)
CNXT MARKET VECTORS CHINA AMC SME 41.79 33.601
ASHS DEUTSCHE X-TRACKERS HARVEST 30.86 38.227
PEK MARKET VECTORS CHINA ETF 10.95 97.421
KBA KRANESH BOSERA MSCI CHINA A 10.36 25.399
ASHR DB HARVEST CSI 300 CHINA A 8.92 1,095.455
CQQQ Claymore/AlphaShares China Technology 7.84 93.459
CN DEUTSCHE X-TRACKERS MSCI ALL 7.22 9.318
MCHI ISHARES MSCI CHINA INDEX FD 5.30 1,588.532
FCHI iShares FTSE China (HK Listed) Index 4.08 26.710
FXI iShares FTSE/Xinhua China 25 Index Fund 3.92 6,045.811
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Source: Bloomberg as of 3.20.2015

As you can see, the gains in the segment have been stellar, especially for the so-called China A-shares funds.

The fund I really like, and one that I’m currently recommending in my Successful ETF Investing newsletter, is the DB Deutsche X-trackers Harvest CSI300 China A-shares (ASHR).

This ETF holds the 300 biggest, most liquid stocks traded on the Shanghai Exchange. Year to date, ASHR is up nearly 9%. As you can see by the chart below, this week the shares vaulted to new highs after government officials reiterated a commitment to do more to “stoke economic growth.”

ASHR_032015

According to analysts at Morgan Stanley, the upside here may just be getting started.

Well known China strategist Jonathan Garner issued a note to clients this week saying that by yearend, the Shanghai index would hit 4,000 and could reach 4,800. That’s another 30% move higher from current levels!

The Morgan Stanley analyst cited several reasons for his bullish opinion on China, including the aforementioned support for growth by policymakers, the current global monetary easing cycle and what he called the “re-engagement in the equities asset class by the local investor base.”

As you likely know, I’ve been a China bull all year. So far, that thesis has proved prescient. If you’d like to find out how my subscribers are making money investing in the best China ETFs out there right now, then I invite you to check out my Successful ETF Investing newsletter, today!

Orwellian Myths

“Myths which are believed in tend to become true.”

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— George Orwell

The genius novelist and social commentator knew the power of believed-in myths. When it comes to investing, there are a lot of myths that tend to become true. Sometimes that’s good, and sometimes it’s really bad. That’s why it is always extremely important to question the conventional wisdom, as you don’t want your money to one day become a mere myth.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Weekly ETF Report readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Ask Doug.

In case you missed it, I encourage you to read my e-letter column from last week about how the strong dollar is impacting the market. I also invite you to comment in the space provided below.

Upcoming Appearance

I invite you to join me at the MoneyShow Las Vegas, May 12-14, 2015. With stock picking taking on renewed importance as the market shows signs of volatility, this event offers an opportunity to hear from a number of experts, including my Eagle Financial Publications colleagues Mark Skousen, Chris Versace and Bryan Perry.

Be a guest of Eagle Financial Publications and register for FREE by using priority code 038656 and calling 800-970-4355 (toll free in the United States and Canada) or signing up online.

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