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One Bright Spot For The Global Economy - China
By Sean Hyman on December 17, 2008 | More Posts By Sean Hyman | Author's Website
Being an avid chart watcher, I always like to see what indices seem to show improvement the quickest. It’s always good to be attune to the first “signs of life” and where they appear.
So I was looking around recently as I routinely do and I noticed that China’s stocks are perking back up again. That’s a good thing. Because if that large economy perks up, then it will help the entire global economy.
In looking at the Shanghai Composite Index below, I see the first signs of life “higher lows and higher highs” on the charts. This tells me that for the first time in a long time, new buyers are coming back into Chinese stocks (as noted by the red downtrend line being broken).
China may lead the way out of the global recession.
There are several technical improvements that we haven’t seen in a while such as: the higher MACD below the chart and the stock prices coming back up above the 50 simple moving average.
These are all signs of life for Chinese stocks. For those that don’t understand technical analysis, it just means that there are signs of renewed strength and buying that haven’t been seen since it came crashing down.
You can look at Chinese stocks like Baidu (BIDU) and the iShares FTSE/Xinhua China 25 Index ETF (FXI) that tracks 25 of their top stocks and you will see a recovery in these too.
If China continues to perk up, the improvement in their economy will help to bring “renewed business” to other countries that they do business with (like the U.S.). This will also improve the overall sentiment out there which is a very important thing to have in order to come out of a recession and a bear market in stocks.
So be sure to check these stocks out, because they could be some of the first ones that lead us out of the global recession.
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China is also suffering from the global economy, they sell products and no one is buying products.
If that were completely true then big institutions wouldn’t be putting enough new buying pressure on the Shanghai Composite Index ($SSEC) or FXI (Chinese ETF) or Baidu (BIDU).
While they have slowed down some, they are still growing overall, more quickly than most of the rest of the world.
So when money starts creeping back into “growth” as its starting to do now (tip toeing its way in)…it seeks out the broad, high growth first and that would be China.
That’s why the charts pushed up higher sooner for China than it did for much of the rest of the world.
One thing I’ve realized after doing this for over 16 years is that charts don’t lie. They accurately show new buying and that’s what we have here.
Everyone has to judge for themselves and get into what they believe in. So if you don’t believe in it, don’t buy any of it for sure.
But if you think there is some credence to what I’m saying here, then you might want to make an ETF like FXI a small portion of your portfolio. See what you think is right for you.
Hope this has been beneficial and helpful to you. Thanks for your post.
How about India. Lots in common with China
India will eventually turn around too. But so far, it’s lagging the pack.
For instance, look at FXI and look at IIF (India). IIF really lags FXI. So the buyers aren’t as convinced of India just yet.
Hope that helps.
Please aall eyes should not be on China’s stock just for speculative investments only, genuine investors should ,as a matter of fact, go for real asset investments in any part of the worid to incease real wealth and growth in productivity in real terms. That should be the thinking now.
China’s markets are responding the best so far which can easily be seen from the charts.
Best to go to the markets that are acting properly and not discount the Chinese market.
I’d invest in any market that was acting right and that also has the longer term growth prospects that China has.
However, I’ve found that my best investments were the ones you couldn’t hardly talk anyone into when you pointed them out and they thought you were crazy for doing so.
It’s when I get huge amounts of agreement that I feel I for sure really need to reconsider investment.
For the masses always get it wrong…and a small group of individual thinkers are the ones that get it right, longer term.