It is a pity investors are more negative than they were during
the bottom of the 2008 crisis when it comes to China ( FXI ,
quote ) .
[caption id="attachment_69705" align="alignright" width="220"
caption="Qingdao skyline, Beijing"]
Yesterday I reiterated the technical buy in the
Chinese market and would argue it continues but today I want to
highlight China's fundamentals that support the technical buy
Exports to China from Taiwan and S. Korea are up for the first
time in 10 and 6 months respectively. China's auto sectors are
strengthening as well, from premium auto sales gaining momentum to
improving tractor sales data last month.
Further improvement can be found in fast food restaurant
operator Yum! Brands Inc. ( YUM , quote ) this past Tuesday Yum!,
announced better than excepted Q3 earnings of $1.00 per share.
According to Yum! Bands earnings release the company saw 9%
y/y increase in total revenue of $3,569.0 million. System
sales growth in China, Yum! Restaurants International (YRI) came in
at 22% and 4% respectively.
Adding to the mix - Chinese state agencies are actively
buying bank shares in the market this week. Chinese officials
have also begun making it easier for foreign investments by
loosening the restriction rules which in turn is providing
additional support to the Chinese economy.
Perhaps the move higher in iron ore and coal prices is the
greatest benefit to the "China Trade". The play is not
necessary the Chinese listed equities or ADRs. It's all about
the resources and even the beaten up cyclicals.
China has been and remains to be the key to the broader emerging
markets' rally and we like what we see. Just do not expect a sledge
hammer to hit you in the head showing you the way. Economic news
flow out of China has been quietly improving and in some cases its
downright interesting from a market perspective.