Friday Surge in China ETF: Like 727 Points Gain on Dow!
Stock-Markets / Chinese Stock Market May 14, 2007 - 09:28 AM GMT
Martin Weiss writes : This is Martin Weiss with an urgent update on the latest upward explosion in East Asian markets — why it's happening, what it means, and what you can do if you're not yet taking advantage of it.
Just this past Friday, we witnessed a phenomenon that most observers seem to be understating, underestimating, or missing entirely:
While the Dow Jones Industrials closed the day with a 111-point gain (0.84%), exchange-traded funds tied to key East Asian markets put that gain to shame.
- The Singapore ETF (EWS) rose at triple the pace, or the equivalent of 361 points on the Dow.
- The Hong Kong ETF (EWH) surged four times more — the equivalent of 498 points on the Dow.
- The most widely traded China ETF (FXI) catapulted skyward by 5.5%, the equivalent of a 727-point surge in the Dow! And …
- The competing China ETF (PGJ) did even better — exploding by 740 Dow-equivalent points!
All on Friday! All in one single trading session!
If these were individual stocks, jumping on the news of an earnings bonanza or a buy-out extravaganza, it wouldn't be so remarkable. But each of these ETFs represent a basket of stocks, much like the Dow.
Or …
If we were talking about single-day, 700-point moves to the downside, we'd have a few historic precedents to refer to. But these are markets that are going UP by the equivalent of 700 points or more, an event that's far rarer.
Or …
If this were just a one-day wonder, it wouldn't be nearly as noteworthy. But this amazing pattern — that I've shown you under the microscope of a single trading day — also holds up under the scrutiny of a telescope scanning months into the past … and, in my view, months into the future.
Or …
If I could see convincing evidence of a speculative bubble, I'd be the first to warn you away from these markets, as I did nearly eight years ago, when the U.S. tech bubble was about to burst. But I see no such evidence.
Surely, no boom is immune from excesses, and no investment is invulnerable to losses. So when you see this kind of upward explosion, you've got to expect fireworks in both directions.
But unlike the smoke and mirrors that helped create the dot-com bubble of the late 1990s, this market phenomenon is supported by a groundswell of economic activity unlike any in modern history.
It reminds me of Venice during the early Renaissance, when modern capitalism was first born.
It conjures images of the United States in the early 1900s, when the nation had just become a global industrial power, building on new technologies, expanding its railroad network, tapping its abundant natural resources.
It even has certain aspects in common with Japan of the late 1940s, rising from the ashes of war, bustling with fervent entrepreneurial activity.
But upon closer examination, it's abundantly evident that China's surge is none of the above. It's a new, unprecedented growth pattern that won't be understood until it's past history, when neither you or I will be around to opine.
My Recommendation: Don't Wait That Long!
The longer you wait to buy a stake in this boom, the less you'll ultimately make.
Right now, it may not be prudent to buy the China ETFs immediately after their upsurge on Friday. And for the same reason, it's probably too late to buy our favorite options on these ETFs, which have already doubled in value in just in the last few days.
But don't look back. Instead …
Remember that no market moves straight up; we're bound to see a temporary correction — now or in the near future. So wait for that correction.
Remember that not all markets move exactly in tandem. Right now, for example, other ETFs — like those tied to the Singapore and Hong Kong markets, are lagging China's — and could soon start catching up. So look for the markets that will lead the next wave.
Most important, bear in mind that …
The Powerful Forces Behind This Phenomenon Are Still Firmly Intact
Specifically, I'm referring to America's massive trade deficits, China's massive trade surpluses, and the great wealth transfer they're creating.
Here's the latest:
In the U.S. the Commerce Department has just reported that the U.S. trade deficit shot up in March to the highest level in six months, driven by a big jump in imported oil. The red ink ballooned to $63.9 billion, up by a bigger-than-expected 10.4 percent from the February level.
Meanwhile …
In China , the government just announced that its April trade surplus more than doubled from March, surging to $16 billion in black ink, compared to $6.9 billion the month before.
Helping to soften the blow, American companies exported a bit more to China in March. But it didn't change the big picture:
More capital being drained from the U.S.;more wealth flowing to China!
This is easily …
The Greatest Wealth Transfer of Modern Times
I've shown you a symptom of this phenomenon as revealed in one day's surge in global stock markets.
I've shown you the gap in terms of one month's jump in America's trade deficit, coupled with an even bigger jump in China's trade surplus.
Now, let me show you what this looks like from a broader time perspective:
Back in 1960s, the U.S. still had respectable trade surpluses — peaking at $6 billion in 1964.
But then, in the early 1970s, the long decline into a massive trade morass got under way:
- Nixon presided over the first big trade deficit — $5.4 billion in 1972 …
- Carter multiplied Nixon's big deficit five fold, giving us $30 billion in red ink in by 1978 …
- Reagan multiplied Carter's deficit another five-fold, digging us into a $152-billion hole by 1987.
- Clinton more than doubled Reagan's worst trade year, letting the red ink flow to the tune of $377 billion! And now …
- Under Bush, our deficit has doubled again, surpassing $763 billion last year — 140 times bigger than the worst U.S. trade deficit under Nixon.
Meanwhile, the progression in China is equally dramatic — in the opposite direction:
A meager ten years ago, China had a meager trade surplus of only $12.3 billion …
For the next eight years, China's trade balance grew in a zigzag pattern, with a surplus of $32.1 billion recorded in 2004. And THEN …
China's trade surpluses experienced a veritable explosion, driving the surplus to $177 billion in 2006.
And economists wonder why our dollar now ranks 51st among the world's major and minor currencies?!
Why our stock market ranked 55th last year and 65th in the first quarter of this year?!
Why our economic growth is among the slowest in the world?!
There's no mystery here. The pieces all fit together, and the numbers speak louder than words.
Dad and I saw these numbers in our charts over a decade ago. The implications were clear then. They're even clearer now:
For investors restricted to U.S. stocks, bonds, and real estate, the future is bound to be challenging. It's going to be increasingly difficult to achieve and sustain steady income, long-term capital appreciation, and a comfortable retirement.
In contrast, for investors who take protective action at home and diversify abroad, the opportunities are boundless:
In China, investors are making not-so-small fortunes as the economy gallops ahead at the annual clip of 11.1 percent in the first quarter. Even with a "slowdown" in the second quarter, the Beijing's State Information Center forecasts 10.8% growth. (With tongue in cheek, some observers are now defining "Chinese Recession" in terms of growth rates that fail to exceed 9.5%.)
In Brazil, investors are making more fortunes, as the stock market surges to new record highs … as the Brazilian real continues to be the fastest rising major currency in the world … and as Brazil's trade surplus surges to $4.2 billion in April.
In India, after a temporary setback, investors are enjoying a new stock market rise, as the country's industrial production unexpectedly surges by nearly 13 percent in March. And …
In Australia, relatively rapid wealth accumulation is a natural consequence of 16 years of expansion without interruption, as the government reports still another drop in the national employment rate — to the lowest level in over 30 years!
Nearly everywhere, formerly "Third World" countries are leaping into the 21st century. Everywhere, smart investors are building vast riches.
If you're among them, be sure to protect your wealth by stashing away a significant portion in the safest investments you can find. If you're not, look more seriously at the many situations we've been telling you about here — to expand your horizons globally.
Important: Tonight is the official release time of the greatest package of global intelligence reports ever published in the history of my company. And if you RSVP by the end of business today (8 P.M. Eastern Time), you'll not only get them free, but you'll also be among the very first investors to get the very timely recommendations they contain.
For details, see the email I sent you Saturday morning with the subject "Gala Edition: Two Monster Money-Making Trends," or call 1-800-236-0407.
Good luck and God bless!
By Martin Weiss
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