Dear Fellow Investor,
Earnings season is upon us. And most investors don't know whether to take that as a positive or a negative…
Typically, earnings surprises or disappointments have the potential to drive the market in either direction. And after the volatile year we've had and the recent plunges in global markets, everyone's on edge.
You can almost feel the air being sucked in as investors around the globe hold their breath. Especially since expectations for the third quarter are bleak.
And I'm not going to be Pollyanna and say that these expectations are wrong. Earnings will not be good.
BUT… they're likely to be better than what most market participants are expecting. Which is good news for the markets.
Historically, mid-October is a time when the market rallies. Even in tough times, like 2001 after the 9-11 terrorist attacks or in 2002 when the worst bear market since the Great Depression was bottoming, we saw the markets rally in mid-October.
This year should be no different. Given the level of selling intensity and panic running rampant in the markets right now, there's a really good chance that history will repeat itself this year.
And that's great news for China stocks. To learn the best ways to profit from this fourth-quarter rally, join China Strategy today!
Why China, Why Now
If you recall, two weeks ago, I laid out four reasons why China stocks would profit greatly from a fourth-quarter rally: 1) China is far less leveraged; 2) China doesn't have a lending mentality; 3) China still has robust economic growth; and 4) China's stock market has been hit the hardest, and is due for a correction.
As you can see, there's a strong likelihood that China stocks will lead the global stock market rally this quarter.
And on top of these four reasons, you also need to consider that the investment landscape has changed and investments once considered medium risk with medium to high reward -- think the U.S. and Europe -- now are high risk with medium reward.
But since Chinese stocks have declined significantly this year, they're still risky -- not high risk, though -- with high reward potential.
And since Chinese stocks are going to be leading the bounce higher in coming weeks -- as we discussed in the four points above -- the time to prepare for that rally is NOW!
On Monday, the global stock markets rallied strongly and kicked off the fourth-quarter rally with a bang. On Monday alone, China stocks bounced nicely with Mainland-traded shares jumping 3.7%, while Hong Kong-traded companies popped 10.2%.
The dramatic rally followed global governments weekend attempts to rejuvenate the global financial system. European governments, including the U.K., Germany, France, Spain and Italy, all provided details on Monday of their plans to buy stakes in struggling banks and to offer hundreds of billions of dollars more in guarantees.
And the U.S. -- feeling the pressure to act accordingly -- directly intervened as well with its plans to inject $250 billion into U.S. financial institutions and to guarantee new debt issues and deposit accounts used by businesses.
This was exactly the type of action that global governments needed to take in order to unfreeze liquidity in the global financial system. And the response to these global plans to prop of banks was nothing short of dramatic, as stock markets around the world snapped back sharply on Monday.
And if you'd have been following my China Strategy advice, your portfolio would have been aligned to capture the move higher. To find out how you should be preparing for the fourth-quarter rally, join China Strategy today!
It's Not Too Late!
We're in the early stages of this fourth-quarter rally, and it's important to note that global markets won't move straight up. There's going to be bumps along the way, as we saw in the past three trading days. After Monday's significant move higher, we watched the global markets retrace their steps and wipe out all of Monday's gains in the past two days.
But as I said, after crashes -- like the one we saw last week -- markets don't move straight up, especially since V-shaped bottoms are rare. And market bottoms are formed with attempt after attempt to retest the low. That's why I believe that we saw this year's bottom last Friday, and that global markets should trade with an upward bias during the fourth quarter.
Plus, don't forget that earnings season is kicking off. And since most analysts and investors are expecting drab reports, the better-than-expected announcements have the potential to surprise and push the global markets higher.
And a number of my China Strategy recommendations will be aiding in this bounce. In fact, two of my favorite China Strategy companies are reporting earnings in the next two weeks.
And trust me, you're going to want on board before these announcements…
In the market rebound on Monday, October 13, these two companies popped nicely -- up 25% and 5%. And these profits are just a drop in the bucket to what we're going to see after better-than-expected earnings are announced. Here's why you need to buy in now:
Stock to Buy #1: China's leading search engine – think the Google of China – will report earnings on Monday, October 20. The Chinese Internet industry is growing by leaps and bounds, and this company -- with its home court advantage -- is profiting greatly from this growth.
During the second quarter, this company reported blowout earnings: Profits jumped 87% and revenue doubled compared with the same period a year ago. And with the company seeing considerable traffic during the Beijing Summer Olympics as Chinese searched the Internet for news coverage and videos, I'm expecting much of the same in the third quarter. Get my current buy advice on this stock immediately by joining China Strategy today!
Stock to Buy #2: China's leading medical devices manufacturer is set to report earnings on Monday, October 27. This company has been at the top of my buy list for months, as it has help up fairly well despite the volatility this year. And it's on its way to becoming a world-class global medical devices giant – in fact, during the second quarter, this company's foreign business was growing faster than its domestic business in China!
All of this expansion and growth has been adding nicely to the company's bottom line, as it reported better-than-expected earnings during the second quarter. Revenues increased 99.5%, while net income was up 54.7%. And I'm expecting another round of fantastic results in the third quarter. To buy in before the company reports earnings on Monday, join China Strategy today for my specific buy advice.
Now, these two companies are just a sampling of the recommendations that I'm providing my China Strategy subscribers as a way to take advantage of the fourth-quarter rally and China's continued economic strength. Join China Strategy today, and I'll explain exactly the best ways to profit in this changing investment world.
Robert Hsu
