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During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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As China Takes Center Stage In The World, It May Be Time To Buy


China's share of global GDP is growing while the United States' share of global purchasing power has been declining as a share of the global economy according to the Economic Cycle Research Institute, a New York-based research group that measures the up and down cycles of the U.S. economy. This trend is surely due to the purchasing power of China’s larger population of 1.3 billion people, four times the size of the U.S. population.

For investors, there is important significance in President Xi Jinping’s declaration at the 19th Congress of the Chinese Communist Party that “it is time for us to take center stage in the world.” Xi has been called the most powerful leader on the globe by The Economist magazine. Plus the U.S. trade deficit in 2016 was $347 billion. These are all signs that China is on its way to further superpower status, and a place where substantial profits are going to be made, despite the role of the government in the economy. In short, the Chinese have corporations growing faster than its economy hat can be winning investments for investors in the west.

Many Chinese stocks traded publicly on financial markets have more than doubled this year, such as the conglomerate Alibaba, the Chinese Facebook or Google, which is traded on the New York Stock Exchange. Incredibly, Alibaba racked up a single day’s sales of over $25 billion in just one day over the weekend. It has 575 million E-commerce customers. I don’t know anyone who can top that. Clearly one of the great winners in the 2017 investment sweepstakes. JD Com, another Chinese internet firm, had revenues of over $19 billion underscoring the vitality of consumer markets in China. Clearly, betting on E-commerce in China will be one of the great winning strategies for some time to come.

I’d bet there will come a day when a goodly number of American investors will have stock positions in China, which is growing its economy 6.8% , three times faster than the U.S. Nevertheless, domestic Chinese stock markets in Shanghai and Shenzhen are still not entirely open to foreign investors due to tight capital controls by the Chinese.

Legitimate reason for thinking stock prices in China could advance at a faster pace than in the U.S. Some 93 public companies from China list their shares in the U.S. stock market currently. The most recent one is Sogou Inc. the 2nd largest search engine in China, which is backed by giant Tencent.

Already this year the Hong Kong stock index is up 29%, double the performance of the S & P 500 and equal to NASDAQ’s advance. Shanghai A shares are up 15%, even with the Dow Jones Industrial Average. Several of the Chinese ETFS like Wisdom Tree China(CXSE) are up well over 50%, double the advance of the NADAQ index of stocks.

China-based companies already represent 28% of the MSCI AC World Index since June 20, 2017 when they were added to the emerging market index. All you have to do is look at Goldman Sachs’ Global Secular Growth list to find consumer discretionary and information technology issues to buy today, Until now foreigners had limited access to mainland-China-based companies trading on the Shanghai or Shenzhen markets, where $7.3 trillion of Chinese Class A shares are traded. Goldman has buy recommendations out on JD.com (JD), with upside estimated at 44%. Also on Goldman's buy list: YY (YY), Momo (MOMO), NetEase (NTES), and  Shenzhou International Group Holdings.

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