Hope in China
China’s manufacturing sector continues to bounce back. We just learned in the last week or so that China PMI came in at the strongest level in 18 months.
And bigger-picture, China GDP expansion accelerated to 7.8% in Q3. That’s up from 7.5% in Q2 and bringing growth rates to 7.7% for the first nine months of 2013 — above expectations.
China exports also surprised to the upside, showing that demand abroad is growing nicely thanks to recovery in Europe and America as well.
Yes, in September and October we saw a lot of trouble for Chinese equities as domestic stocks continued their outperformance. But many analysts are starting to change their tune about how oversold China is and how there’s starting to be some signs of upside.
Trading China is best done by ADRs — or Chinese equities that trade domestically on U.S. exchanges — because that means these companies must meet the same regulatory hurdles as American stocks like Walmart (WMT). Some picks to consider if you believe in a cyclical recovery in China would include state-run oil giants PetroChina (PTR) or CNOOC Ltd. (CEO).
Of course, instead of picking individual winners, you can always go broad with a China ETF like the iShares China Large-Cap ETF (FXI).