When I shared this idea with my colleagues at the beginning of this week, some of them smiled and then walked away shaking their heads. I think they thought I may be due for a long vacation.
But today, my belief that this is a great time to buy China seems like a perfectly sane move, especially after big Chinese stocks have taken a beating. In particular, some of the world’s best tech firms have been pummeled.
For example, one of my favorites, Alibaba Group Holding (NYSE:BABA) is off 7% in the past five days.
For the right stocks, like BABA and Chinese hotelier Huazhu Group (NASDAQ:HTHT), this is the ideal time to buy now that they’ve been sold on solely on trade war fears.
U.S. Relations with China
The fact is, there is no trade war with China. There’s plenty of rhetoric to be sure, but the underlying fact is China needs the U.S. as much as the U.S. needs China. They are inextricably linked economically.
Historically, China has been the biggest buyer of U.S. Treasuries in the world today. That mean as the U.S. increases it debt (which it is by substantial margins with big tax cuts and large increases in defense spending), it has to issue bonds to get the money it needs to service existing debt and spend what it needs.
If China stops buying — or in a worse-case scenario, starts selling — the U.S. debt it holds, the U.S. economy would be in significant trouble.
On the China side, the government has come out with a huge Made in China 2025 initiative that focuses on have key strategic domestic sectors dominated by Chinese companies by 2025. This is why the Chinese have stepped up their interest in buying into U.S.-based tech firms and expanding Chinese companies into the U.S. market.
The Donald Trump administration is making sure that it is sending a clear message to China that U.S. firms are not up for sale or going to be manipulated to make help this initiative succeed.
But this type of exchange also proves China’s economy is more developed and its global economic power needs to be respected. This is a change from past trade negotiations, where the U.S. always held the upper hand.
The real teeth of the trade war talk will likely come from U.S. economic allies, interestingly.
There were a few developments on the trade tariff front at the recent G7 meeting where President Trump stated that the U.S. would drop all tariffs as soon as other G7 members did the same.
Given that there’s no love lost among most G7 leaders and President Donald Trump (and this is a U.S. election year), we’ll likely see more confrontations between the U.S. and our major trade partners in the upcoming months. But it won’t be anything that will kill the economic recovery on either side of the Atlantic.
Right now, with the exception of a few great ADRs like BABA and HTHT, my focus is shifting to stocks that are benefiting from domestic U.S. growth.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
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