It's Official: China's 'Landmark' Moment Is Here
It's official: China's 'landmark' moment is here... Sjug's bold prediction is now a reality... MSCI grants emerging market status to Chinese stocks for the first time... Why Steve says China is still a 'buy'...
Steve Sjuggerud's bold China prediction is now a reality...
It finally happened...
Yesterday, at 4:30 p.m. Eastern time, global index provider MSCI officially announced it would add domestic Chinese stocks – known as "A-shares" – to its emerging markets index.
This is a big deal. As news service Reuters reported following the announcement...
China's stocks took a major step toward global acceptance on Wednesday, finally winning a long campaign for inclusion in a leading emerging markets benchmark, in what was seen as a milestone for global investing...
Inclusion in the index marks a key victory for the Chinese government, which has been working steadily over the past few years to open up its capital markets, investors said.
"Given the size and importance of China as an economic superpower, I think this is a historic moment," Kevin Anderson, senior managing director of State Street Global Advisors and head of investments in the Asia Pacific region told Reuters. "It's a long-awaited and much-debated decision in the past, and I think it's more than symbolic as it will create additional flow of capital and potentially a new segment of institutional investors in the China market."
Of course, this should sound familiar to regular Digest readers...
It's exactly what our colleague Steve Sjuggerud has been predicting for months. As he explained in detail in the May 6 edition of our weekend Digest Masters Series...
June 20, 2017 will be one of the most important days in the history of investing...
On that one day, big investors will be forced to change the way they invest.
On that day, MSCI... will announce the results of its annual meeting to make any changes to its index weightings. This time around, the changes should be historic... I predict – for the first time in history – Chinese A-shares will finally be included in MSCI's global indexes.
This is big... Right now, roughly zero percent of American retirement assets are invested in local Chinese A-shares. But that will all change when MSCI includes local Chinese stocks in its indexes.
What will happen is – whether they realize it or not – Mom and Pop America will end up owning Chinese stocks in their retirement funds. Here's why... 94% of U.S. pension funds that are invested in global stocks are benchmarked to MSCI's indexes. So if you're a teacher, a firefighter, or anyone else with a decent pension fund, you will unknowingly start owning local Chinese stocks for the first time... very soon.
Ultimately, hundreds of billions of dollars will flow into Chinese stocks as this process unfolds – regardless of whether they're a good buy or not.
But Steve didn't just predict when this event would happen...
He also told readers exactly how it would likely play out. As he explained the following day in the May 7 Digest Masters Series...
If MSCI announces a plan to include China in its emerging markets index, the first shift will likely happen a year later... MSCI wants to give these pension funds PLENTY of advance notice that they will need to be buying Chinese stocks.
It looks like MSCI will start out with baby steps as well... It will likely begin with 5% of the long-term plan for inclusion. That doesn't mean adding a 5% allocation to Chinese stocks. That means it wants to add 1/20th of its final allocation to China – a small number.
That means that in June 2018, the MSCI Emerging Markets Index will likely look something like this...
Incredibly, MSCI's plan looks nearly identical to Steve's prediction. As financial-news network CNBC reported this morning...
MSCI will take 222 of the biggest names in their MSCI China A International Index (out of 448), and include them in their relevant global indexes in the middle of next year. These are the largest and most liquid names in the China mainland market.
Rather than giving a 100% market capitalization weighting to each stock, they are giving each stock an initial weighting of only 5% of its market cap. That will greatly reduce the initial weighting of the China mainland stocks...
And just as Steve expected, MSCI said it would continue to increase the weighting of these companies – assuming the Chinese government continues to meet its expectations – all the way up to 100%. It also said it would consider adding additional Chinese A-shares after that.
Congrats to Sjug on another incredible call...
He knocked this one out of the park... And his bold prediction has set his subscribers up to make potentially life-changing gains over the next several years.
So what comes next? Steve sent a short note to his subscribers updating them on the news. Because we know many Digest readers are following this story, he graciously agreed to share a portion with you today. Here's Steve...
The folks at MSCI finally did it.
They finally made the right decision.
We've been telling you this was coming for a while now... Yesterday, the largest index provider in the world – MSCI – made a historic announcement. It announced a plan to finally include local Chinese A-shares in its benchmark emerging markets index.
If you're a longtime subscriber, you know the importance of last night's decision. You understand the consequences.
This is the start of a major shift around the globe. By the time the dust settles, up to $1 trillion could flow into Chinese stocks... simply because of yesterday's announcement.
Things like pension funds and hedge funds look to MSCI for guidance on their holdings. They're benchmarked to MSCI's indexes... like the main emerging markets index that just included Chinese A-shares. Up until yesterday, MSCI had said that these local Chinese stocks were too difficult for foreign investors to buy and sell.
But China's efforts to open up its markets have finally paid off... Most importantly, we're positioned to profit... We will cover MSCI's decision in more detail in our next issue... But for now, know that we got it right.
MSCI finally made the right decision. It decided to include local Chinese A-shares in its emerging markets index. And that decision means as much as $1 trillion could flow into local Chinese stocks in the coming years.
If you're not already following Steve's China research, there's one important thing you need to know today...
It's still not too late to profit from this massive trend.
Yes, Chinese stocks have rallied ahead of the announcement. Steve's True Wealth China Opportunities subscribers are already up on 19 out of 21 recommendations, for an average gain of 15% across the entire portfolio.
But Steve says every one of these recommendations remain a "buy" today.
You see, this trillion-dollar shift is just beginning... And as Steve has explained, it will continue for years, regardless of whether Chinese stocks remain a good buy.
Yet today, Chinese A-shares remain relatively cheap... And most investors still aren't interested in these stocks at all.
In other words, you haven't missed anything yet. The biggest gains are still to come.
Steve will be updating his True Wealth China Opportunities subscribers on all the details of this week's decision in the June issue, due out tomorrow after the markets close. If you'd like to be among the first to receive it, click here to learn more about a subscription now.
New 52-week highs (as of 6/20/17): American Express (AXP), Becton Dickinson (BDX), Morgan Stanley China A Share Fund (CAF), WisdomTree Japan Hedged SmallCap Equity Fund (DXJS), Eaton Vance Enhanced Equity Income Fund (EOI), McDonald's (MCD), Paysafe (PAYS.L), Stanley Black & Decker (SWK), and Weight Watchers (WTW).
In today's mailbag, a wonderful testimonial from a longtime subscriber... more on our "big picture" advice... and a complaint for Steve. Send your questions, comments, and concerns to feedback@stansberryresearch.com.
"I subscribed to The Income Portfolio in February and completed purchasing the recommended stocks by the middle of March. The cost of $6000 seemed high at the time, but like all my subscriptions to Stansberry advisories it proved to be a no brainer. I am up over $35,000 on the stocks and bonds recommended which I didn't already own. Simply put I made 5 times my subscription cost in less than 5 months, never lost a minute of sleep when the market declined and freed myself up from the daily grind of checking and rechecking my portfolio. The annualized return of my total investment is close to 14%. When I retired we based our lifestyle on an overall 6% return. This level of return is more than I dreamed. PS. I also am a lifetime Flex subscriber and a lifetime TradeStops subscriber. If you add up the costs of all my subscriptions I'm still way ahead just on the profits of The Income Portfolio. Thank you." – Paid-up subscriber Frank R.
"Porter, very much enjoy the analysis and your effort to explain the big picture. Keep up the great work. Learning and understanding market cycles has helped cut through the noise and price swings. It does help with confidence and trying to believe that as an individual investor you actually can have great results and make money that can make you financially free." – Paid-up subscriber Daniel C.
"I fully expected communication from Dr. Steve after [yesterday's] exciting announcement and must say I am disappointed. However, I am delighted to be part of your organization. I believe I now have the foundation and guidance to achieve great wealth over the coming years. Cheers!" – Paid-up subscriber Lisa T.
Brill comment: Lisa, by now, you should have received a special update about the announcement from Steve. It's also available on the Issues & Updates page of the True Wealth website. Check your inbox and if you still haven't received it, please contact our customer service team at (888) 261-2693 and they'll be happy to help troubleshoot the problem.
Regards,
Justin Brill
Baltimore, Maryland
June 21, 2017