This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Right and Wrong Way to Play China

There are two action plans that arise from this. First: How much money should one have in China? I'm a believer in small exposures to many things -- countries, themes and so on. Currently, I target China at 2% to 3% for clients, and I could see increasing that to 5% to 6% if indexes fall further.

That lending is now a source of worry is interesting. I've been writing for ages that I don't want financial exposure to China, which, unfortunately, rules out using the iShares FTSE/Xinhua 25 Index ETF (FXI). Half of the ETF's assets are in financial firms. Even the SPDR S&P China ETF (GXC) is very heavy at 33%.

That leaves two other ways into China. One is through individual stocks, of which there are over 100 to choose from on the Nasdaq and New York Stock Exchange. Another is with certain specialty ETFs. For example, the PowerShares Global Coal Portfolio (PKOL) weights almost a quarter to China, the Claymore Solar ETF (TAN) has 30% and the EGShares Energy Fund (EEO) has 19%. Between stocks and specialty funds, it's easy to add Chinese exposure to a portfolio and still avoid the one sector that seems to be the source of concern.

The other action point is the realization that if a lending meltdown in China causes another major decline, it will, at least initially, bring down most of the other emerging markets in sympathy. That can happen in countries that seemingly have no fundamental connection to China. Such a drop could be fast and painful for people who learn the hard way that they had too much exposure. As the chart shows, in the past five years, the iShares Emerging Market Index Fund (EEM) has doubled, while the S&P 500 is down 10%. For U.S.-based investors benchmarked to the S&P 500, it doesn't take 30% in emerging markets to add value versus the S&P 500.
2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
FXI $29.73 0.00%
GXC $60.99 0.00%
TAN $23.94 0.00%
AAPL $94.02 0.00%
FB $104.07 0.00%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs