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

Time to Buy China

NEW YORK ( TheStreet) -- The past few months have seen a perfect storm in China. Externally, the whole world was slowing down, the eurozone was facing looming disaster, industrial metals and coal prices were in free fall just as stockpiling in China reached the height, and MuddyWaters picked the perfect time to expose the rampant fraud and mismanagement among Chinese public companies.

Internally, inflation was sizzling, social discontent against economic polarization and corruption was boiling, labor cost was rising, real estate and credit bubbles were busting, power transition was running into unexpected troubles and various interest groups (both political and economic types) took advantage of the paralysis to speak up. It was not exactly chaos yet, but it sure looked close.

But things have changed dramatically over the past week.

The Outright Monetary Transactions announced by the European Central Bank and especially QE3 by the Fed have substantially lessened the tail risk in global economy over the short term. Of course, neither solves the problem, and the latter carries enormous longer term risk but that's for another day.

QE3 will no doubt increase the inflation pressure in China, making it much trickier for the central government to strike the balance of stopping the real estate and credit bubbles and preventing free-fall, amidst the tangled battle against local governments and various powerful interest groups. But it helps, lessening a much deeper problem: overcapacity in virtually all sectors of manufacturing. As long as the export machine gets chugging along again, it buys precious time to deal with all other issues.

The vacuum and rumor mill one month before the big meeting formalizing the once-a-decade power transition also came to an end last week as the anointed new leader, XI Jinping, surfaced after weeks of sudden disappearance from media. There are definite signs of his opponents, primarily Bo Xilai who recently lost his bid in a very public and scandalous fashion, are stilling fighting.

For example, suspicion that the recent waves of anti-Japanese demonstrations across 40-plus cities in China have Bo's hand behind the scenes seems quite reasonable. This has desperation written all over it. The best the opponents can hope for at this stage is to gain a bargaining chip or two; the worst is that they overplay their hand and get wiped out for rocking the boat for everyone in power.
1 of 2

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 $32.66 0.00%
GLD $122.96 0.00%
AAPL $95.18 0.00%
FB $117.43 0.00%
GOOG $692.36 0.00%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs