Dear Fellow Investor,
Last week, we experienced one the best trading weeks all year, as the domestic markets rallied for five straight days around the U.S.'s Thanksgiving holiday. During that time, the Dow gained nearly 17%!
And the picture was just as bright around the globe, as Hong Kong's Hang Seng index also rallied for five days straight and gained 13%.
But as we've come to expect, the positive vibes in the global markets abruptly came to a halt. On Monday, the Bureau of Economic Research announced that the U.S. has been in a recession since last December.
The Street didn't particularly like the bad news, and the Dow Jones tanked, losing more than 7%. And, as you know, bad news travels fast -- Asian markets plunged with the Hang Seng plunging 5%, Japan's Nikkei index losing 6% and Russia's RTS index dropping 2%.
Talk about a tough investment environment!
Fortunately, though, we may be looking at a less volatile December. While I'm expecting even more bad economic news (such as more unemployment and a decrease in retail sales) in the U.S. in the coming weeks, the domestic markets should build up resistance to the negative headlines as much of it is already priced in.
What's even better is that Chinese stocks have out-performed American stocks in recent weeks, and I'm expecting this to continue through yearend. In fact, since the global markets plunged on October 27, the Hang Seng index has jumped 23% higher while the Dow has gained only 5%.
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China Cuts Interest Rates AGAIN!
One of the reasons that Chinese stocks have been more resilient in recent weeks is because the China's policymakers continue to show their dedication to supporting the country's economy. And because of these aggressive steps, the Chinese stock markets should hold up better than the U.S. markets in the coming weeks.
Case in point: Just last week, China's central bank -- the People's Bank of China -- slashed interest rates for the third time since Lehman Brother's collapse on September 14. It cut its one-year lending rate by an incredible 108 basis points to 5.58%. This marks the largest interest rate cut for the Chinese central bank in the pas decade!
But that's not all China has up its sleeve. I'm expecting the Chinese government to continue its monetary easing policy in order to support the country's economy. And I wouldn't be surprised to see even more bold action by Chinese policymakers.
In fact, there are already talks that the Chinese government may use part of its nearly $2 trillion foreign reserve to invest directly in Chinese shares on both the Hong Kong and Shanghai stock markets.
So there's no denying the Chinese government will take whatever action necessary to support its economy and stock markets.
That's why I've been advising my China Strategy subscribers to remain cautiously optimistic during this tough investment period, and only put their money to work in strategic Chinese plays -- particularly companies benefiting from China's continued government intervention.
In fact, my recent recommendation to benefit from China's $586 billion stimulus package -- China's largest producer of aluminum and alumina -- has jumped 65% since the stock market plunge on October 27. And my China Strategy subscribers are sitting on a 42% gain since I recommended it on November 20.
These are the types of companies that we will be focusing on in China Strategy as the Chinese government keeps economic growth as its top priority and other countries struggle with stagnant growth in the New Year. I don't want you to miss out on a single profitable opportunity -- join China Strategy today!
Robert Hsu
