Positive signs for the Chinese economy (
FXI
,
quote
) continue to materialize as the East Asian giant appears to be
increasingly removed from the economic woes on the European
continent.
[caption id="attachment_33411" align="alignright" width="300"
caption="Pudong skyline"]
[/caption]
May export numbers
indicated definitive improvement in the Chinese economy. Exports
rose 15.3% month-over-month, well above the projected 6.8% increase
by market observers. Additionally, the 15.3% growth represents a
substantive increase over April's 4.9% increase in exports.
Chinese imports also grew 12.7% on an annualized basis.
May's export growth is lower than the roughly 20% growth in
exports the Chinese economy experienced in 2010. But it does
indicate growth in a sector you would normally assume to be
adversely affected by global macroeconomic concerns.
According to reports, an increase in demand from the U.S.
outweighed the negative ramifications of slowing European
growth.
Investors could expect these numbers to become progressively
better over the summer as the result of
recently enacted stimulus by the Chinese
government
. As the government-approved stimulus package materializes, trade
statistics should reflect the improving health of the Chinese
economy.
Export-based growth is unlikely to be a sustainable manner
through which the
Chinese economy can maintain growth
. But in light of the global financial crisis, a healthy
export sector is certainly not a bad thing for China in the
near-term.
Assuming this growth is indicative of an increasingly healthy
Chinese economy, most stocks with Chinese exposure should react
positively over the near-term. That's barring further downside on
the European front, which would, hypothetically, drag down all
stocks, no matter how healthy their fundamentals are.
As a result, investors should look into stocks as wide-ranging
as Caterpillar (
CAT
,
quote
) to Yum! Brands (
YUM
,
quote
). A rising Chinese economy, which in light of recent economic
stimulus, is likely to continue, will probably lift all boats with
exposure to the country. Assuming euro zone problems don't
absolutely overwhelm markets, Chinese plays could be a good long
position here.
Disclosure: Author's immediate family long YUM and CAT
