Chinese Stocks are on Fire
While sitting in my Barcalounger in the nice relaxed atmosphere one gets after a trip to the gym, I happened to catch the first half of the Donald Trump State of the Union. Like all SOTUs, it was a snoozefest — a laundry list of pats on the back and goals for next year.
Here’s a sentence the speech needs: “Please save your applause until the end.” Is there any other speech format where the clapping is so ridiculous? And the callouts to victims and heroes... I think Clinton started that, but damn is it trite and pedantic. A sample of one proves nothing.
What I do know is that the world didn’t like the “America First” agenda and started selling dollars. The downfall of the dollar is something I’ve been talking about here at Energy and Capital for over a year.
Here is a four-year chart slicing through support:
The dollar does not fall by itself. It must fall against other currencies. The above chart reflects a basket of currencies.
As the dollar goes down, emerging markets become more valuable, as do internationally traded commodities such as gold and oil.
Here is the chart of China’s Large-Cap ETF (NYSE: FXI). As the dollar has slid, China’s shares have nearly doubled.
Officially, China is growing at 6.9% GDP. But many people think this number should be much higher due to the fact that China overstated its numbers during the last downturn and is thus understating them now. This idea is backed by electricity usage and other esoteric measures.
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The Economic Times writes:
China's economy grew faster than expected in the fourth quarter of 2017, as an export recovery helped the country post its first annual acceleration in growth in seven years.
In any event, you can’t ignore the potential gains of the fastest-growing top-tier market.
One way to invest is in electric vehicles. There were 88.1 million cars sold in the world last year. The majority of these were sold in China.
But due to the well-documented air pollution, China is cracking down on auto emissions. It wants to go full electric.
As the Wall Street Journal reported:
China will force auto makers to accelerate production of electric vehicles by 2019, a move that will ripple around the globe as the industry bends to the will of the world’s largest car market.
The plan uses a quota system that means 10% of all cars sold must be some form of electric, and this goes up to 12% in 2020.
In 2017, about 700,000 electric cars were sold in China. That’s more than all the electric cars sold globally in 2016. This year, 2 million electric cars will be sold, and by 2020 that number will reach 3.4 million.
I’ve found one $9.45 company that has the largest market share for electric vehicles in China. And unlike Tesla, it turns a profit. Over the next few years, the EV market in China will boom along with the Chinese economy and stock market.
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All the best,
Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Crisis & Opportunity and Managing Director of Wealth Daily. He is also a contributor for Energy & Capital. For more on Christian, see his editor's page.
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