The Dow clawed back up above 15,000 Monday—marking the best day Wall Street has had in weeks. Much of the rally is thanks to strong trade data from China. And lately we’ve been hearing a lot about Chinese stocks, which just had their best day since December 2012.
So I wasn’t surprised to receive this question in my inbox today: Why are Chinese stocks doing incredibly well?
Well, one of the reasons we’re seeing Chinese stocks on the move is that there are telltale signs of a sustainable growth.
The Chinese economy is expected to see a 7% to 8% annual growth rate over the next few years. While this represents a slowdown from recent years, it’s still an enviable position compared with many emerging economies around the world—the other BRIC economies (Brazil, Russia and India) are currently growing at 2.7%, 4.3% and 6.3% annual rates respectively.
As the world’s largest exporter, much of China’s growth hinges on trade, so let’s circle back to those trade numbers. China recently reported phenomenal trade figures for August. Specifically, China’s exports surged 7.2% last month, faster than the 5.1% gain we saw in July and a big improvement over a 3.1% decline in June. Also encouraging is that China’s imports rose 7% in August, which is a sign that its domestic consumption is likely heating up. It also doesn’t hurt that inflation has remained mostly in check in China.
I have some Chinese companies in my Ultimate Growth newsletter that have been really leading the way. I also added some other larger names to my Blue Chip Growth newsletter. I really like that pocket of the world right now because many of these companies are posting stunning sales and earnings growth. Specifically, I am looking into opportunities tied into China’s real estate market, its auto market, as well as its internet boom.
But at the end of the day, I’m always going to look for quality. So before you load up on Chinese stocks, I urge that you run each potential buy through my Portfolio Grader stock screening tool.