President Donald Trump’s tough rhetoric towards Chinese economic practices turned many Wall Street “experts” cautious on Chinese stocks. They feared a possible trade war, and that would not be good for anybody.
However, Chinese stocks today look better than they have all year. In fact, the Chinese benchmark stock index, the Shanghai Composite, made a strong technical move this month, breaking through a price ceiling that kept it in check for months.
Despite the political climate, Money Morning Director of Technology & Venture Capital Research Michael Robinson has been bullish on Chinese stocks throughout 2016 and 2017.
Investors who have followed his advice have already banked gains of 35% this year.
And Michael sees more good news ahead for Chinese stocks in 2017…
Both the media and Wall Street are missing a key fundamental driving China’s economy – internal growth, especially on the Internet, untouched by trade.
Massive Growth Will Drive Chinese Stocks Even Higher
So why was Michael so bullish on China’s e-commerce stocks earlier this year, when most other analysts saw trouble ahead?
Just about every tech exec he meets emphasizes the importance of China. It’s now the world’s second-largest economy – and one with a massive shift to urban centers and a rising middle class who are spending a lot of their money while online.
Last year, 43 million more Chinese citizens logged onto the web for the first time, according the China Network Information Center. As a result, some 731 million Chinese are now online. That makes China’s web population more than double the size of the one we’ve got here in the United States.
And it still has a lot of room for growth. The analysts at Forrester note that online sales, including those from mobile devices, stood at roughly $307 billion in 2014. By 2019, that figure will have more than tripled to $1 trillion.
But that doesn’t mean you can just pick any Chinese e-commerce stock, buy a few shares, and wait for returns. The strong pessimism on Wall Street concerning these stocks could lead to pullbacks for individual stocks.
That’s why we’re recommending the safest way to play Chinese stocks today while still offering plenty of upside…
The Safest Way to Invest in Chinese Stocks Today
Kevin Carter is one of Michael’s Silicon Valley colleagues and the founder and chair of the Emerging Markets Internet & E-Commerce ETF (NYSE Arca: EMQQ). His exchange-traded fund (ETF) sits in the sweet spot between one of the world’s fastest-growing economies and one of the world’s fastest-growing industries.
EMQQ’s top holdings include Chinese e-commerce stars like Alibaba Group Holding Ltd. (NYSE: BABA), Tencent Holdings Ltd. (OTCMKTS: TCEHY), and JD.com Inc. (Nasdaq ADR: JD). But it also owns a number of lesser-known e-commerce stocks that are focused on emerging growth sectors in other countries.
With the EMQQ ETF, you also get a piece of these five stocks…
Bitauto Holding Ltd. (NYSE ADR: BITA): This web company offers Internet content and online marketing services to China’s auto industry. A report by industrial consultants McKinsey & Co. predicts that SUV sales will triple by 2020, although passenger cars will still make up most of the market. And China is expected to contribute 34% of overall growth in the sector over the next five years – and North America a mere 14%.
Ctrip.com International Ltd. (Nasdaq: CTRP): This is like getting the Chinese versions of Expedia Inc. (Nasdaq: EXPE), Priceline Group Inc. (Nasdaq: PCLN), and Orbitz Worldwide Inc. (NYSE: OWW) – all in one stock. As with most sectors in China, the air travel market is growing at stunning rates. China is already the globe’s second-largest air travel market and, according to the International Air Travel Association, will overtake the U.S. market within the next two decades.
MercadoLibre Inc. (Nasdaq: MELI): This is the dominant online shopping and payments portal in Latin America, a region with a population of roughly 620 million. You can see the region’s e-commerce growth in MercadoLibre’s results for the June quarter. During those three months, the Buenos Aires, Argentina-based company reported 41% growth in the number of items sold, reaching 61.5 million, while total payment transactions increased by 63.3%. Overall sales rose 58% after accounting for currency changes.
Naspers Ltd. (OTCMKTS ADR: NPSND): This South African company is EMQQ’s fourth-largest holding, but it’s hardly known in the United States. Naspers provides a wide range of e-commerce services and platforms from its base in Cape Town to more than 130 countries. It’s now the largest company in Africa – and the seventh-largest Internet firm in the world. Naspers also has a stake in Flipkart Internet Pvt. Ltd., the “Amazon of India.”
Qihoo 360 Technology Co. Ltd. (NYSE: QIHU): Qihoo is a homegrown Chinese cybersecurity company. And that’s a very big deal given the lack of trust between the United States and China regarding cybersecurity. The Americans think Chinese software and hardware have spyware, and the Chinese think the same of American products. This makes Qihoo a winner for 1.4 billion Chinese people – and all their devices.
Since the beginning of this year, EMQQ has gained 52.3%, compared with the S&P 500’s 9.1% advance. In fact, it’s gained more than 35% since Michael told you about it two weeks after Inauguration Day.
No doubt – with EMQQ, you get a lot of upside from a tech sector – the emerging markets one – that’s growing much faster than the mature market here at home.
We do have to warn that this ETF trades around 100,000 shares per day, so it is not for short-term traders. However, Michael sees this as a long-term investment and one of the safest ways to invest in Chinese stocks today.
— Money Morning Staff
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Source: Money Morning