Dear Fellow Investor,

The numbers aren't pretty. The data is ugly. And the rumors are deadly.

When we bid farewell to 2008 a couple short months ago, we all knew that we weren't saying good-bye to the economic and financial woes of that year. Nope, they definitely have followed us into 2009, and have continued to wreak havoc on global economies and stock markets.

Just look at the numbers, year to date:

• India's Sensex index has dropped 8.5%
• Hong Kong's Hang Seng index has lost 11%
• Europe's FTSE index has fallen 14%
• The S&P 500 has declined 14%
• Japan's Nikkei index has plunged 18%

And for many of these nations, it's not going to get better any time soon.

That's because much of the world has fallen into a recession, and these countries are likely to experience more economic contraction this year. Two countries that have been suffering from a recession for over a year now include the U.S. and Japan.

In the fourth quarter of 2008, the U.S. GDP dropped 3.8%, and economic growth is projected to decline 2.7% in 2009. And Japan's economy is supposed to contract 4% in the first quarter after experiencing a 12.7% decline in the fourth quarter of 2008.

All of which hasn't boded well for their respective stock markets, as you can see in the numbers above. In addition, action by both of these nation's governments has yet to boost confidence in their economies.

Take the United States, for example. The U.S. government implemented its second economic stimulus plan last week, with more tax cuts, job creation and mortgage help. Yet, the program failed to improve investors' confidence in the economy.

But is it any wonder? More economic data was released this week showing that sales of existing homes in the U.S. fell 5.3% in January, bringing the sale of existing homes to its lowest level in nearly 12 years!

It appears that each step the U.S. government takes forward to stimulate the economy is overshadowed by another bad economic news report -- which typically hits stock prices like a ton of bricks.

And if that wasn't bad enough, the rumor mill has been buzzing recently about the possibility of bank nationalization in the U.S. The possibility of a complete nationalization of major U.S. banks definitely made investors anxious -- it would wipe out both equity and debt holders -- which is what dragged the markets down earlier this week.

In this type of environment, I'm not really that surprised investors have shied away from the stock market, stuffing their money under the mattress in hopes of brighter skies ahead. I'll be honest; all this negative news has made me grow increasingly pessimistic about the global economy.

That's why I have been actively adjusting my investment strategy in China Strategy to reflect the current environment and to help investors make money despite these tough economic times. That's because there are other ways to make money – on the short side and in inverse ETFs.

I've already started implementing this type of strategy in my Asia Edge service, and it has paid off handsomely – up 37% in our play shorting Japan. And now, I feel it is a good supplemental strategy to add to my China Strategy service, as it will help hedge our current recommendations while we wait for the Chinese economy to fully turnaround.

Let me help guide you through these uncertain times, too, join China Strategy today.

The Silver Lining

While practically every country in the world has been affected by the financial and economic crisis, China is the only major economy with any positive news. Its $586 billion stimulus plan is already helping to boost housing, infrastructure and domestic demand. And the Chinese government's decisive rate slashing campaign -- five interest rate cuts since September -- is encouraging bank lending.

All of these positives will help stimulate economic growth within the country. I continue to believe that China will be the first nation to overcome this economic downturn, and it will happen in the second half of this year.

As a result, the Chinese stock market has already diverged from stock markets around the globe. While most stock markets have continued to decline in 2009, the Shanghai index has jumped nicely -- up 21% year to date.

What's difficult, though, is that foreign investors cannot invest directly in the Shanghai exchange.

But that doesn't mean that we can't take advantage of the run-up in Shanghai-traded shares. In fact, there's a major Chinese ETF that allows us to profit from the strength of the Shanghai market. And it's up a whopping 31% since the beginning of the year!

What makes this ETF such a hot investment right now is that it allows us to fully take advantage of the strength of China's state-owned enterprises (SOEs). If you recall, in past dispatches I discussed how the Chinese government will prevent SOEs from failing and flood their businesses with funds to help them remain solvent.

And this broad-based, closed-end fund invests in some of China's most important sectors, including energy, metals & mining, and machinery. Again, this fund has popped 31% in the past two months, and as the Chinese economy continues to turnaround, we can only expect it to benefit more.

To learn how you can profit from the strength of Chinese stocks right now, join China Strategy today!

Sincerely,

Robert Hsu