These Stocks Can Easily Double in the Next 12 Months
Editor's note: Chinese stocks are about to explode higher.
Steve Sjuggerud believes the bull market will start on June 20.
In today's Masters Series – adapted from the April issue of True Wealth China Opportunities – Steve discusses the timeline for how this will unfold... and explains why China could easily rise triple digits over the next year...
These Stocks Can Easily Double in the Next 12 Months
As I explained yesterday, MSCI – the world's leading index provider – is about to make an important announcement... whether it will add local Chinese A-shares to its emerging market indexes. And there are three dates to mark down on your calendar...
Date No. 1
On June 20, 2017, I expect MSCI to announce its long-term plan to solve this problem.
You see, MSCI annually reassesses its index constituents' weightings. Then it announces any major changes in June.
I was hopeful that MSCI would announce last June to include local Chinese stocks in its emerging markets index. It chose not to for several reasons. But in recent months, China has cleared the hurdles MSCI set.
This is a no-brainer decision... By June 20, MSCI will announce a long-term plan to begin including local Chinese A-shares in its emerging markets index.
That's date No. 1.
However, money won't begin shifting around on our first date. It's purely an announcement. We likely won't see a change in the MSCI Emerging Markets Index until our second date...
Date No. 2
The second piece of our timeline comes next year.
If MSCI announces a plan to include China in its emerging markets index, the first shift will likely happen a year later, in June 2018. Apparently, 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...
According to MSCI, 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...
This will be the first of many increases to the portion of local Chinese stocks in the index. We don't know exactly how often further increases will occur. Our "script" is for quarterly 5% increases. But it could be slower – like 5% semiannual increases.
You want to build your full position in China between now and June 2018 – to get in ahead of the crowd.
What we do know for sure is MSCI's long-term goal. And that's our third date...
Date No. 3
MSCI has already shown us the finish line. It has told us exactly what the MSCI Emerging Markets Index will ultimately look like...
Eventually, Chinese stocks (including A-, H-, and overseas-listed shares) will make up roughly 40% of the index.
Here's how things will look...
This final picture is our third date. But again, we don't know exactly how long it will take to get here.
I believe this will be a five-year process starting in June 2018. Again, MSCI will likely add another 5% each quarter – for five years. A less optimistic picture is a 10-year inclusion process with semiannual changes.
Either way, this is a big, long-term story. Our third and final date is years away. But this sweeping change will likely see up to a trillion dollars move into Chinese stocks by the time it's all said and done.
Our story has been the same all along: This change is coming, and we want to get our money there first.
It's also worth noting that China's stock market isn't the only place about to see massive inflows. The exact same thing is happening in China's bond market.
We're not buying Chinese bonds. But this is more proof of a larger story...
Chinese government bonds are already beginning to be included in global bond indexes. And Morgan Stanley's Asia research team recently noted that a 3%-5% inclusion of Chinese bonds could mean $250 billion-$300 billion moving into this market.
China's economy is opening to the world... And we'd be foolish not to get ahead of these big changes and profit.
We've devoted 30% of our True Wealth China Opportunities portfolio to doing exactly that. And even though these are big, long-term shifts, we still can make incredible profits very quickly...
Why China Can Easily Soar Triple Digits in 12 Months
Our big-picture MSCI story will take years to play out. But that doesn't mean we can't make incredible gains in Chinese stocks very quickly...
China, maybe more than any other global stock market, has a history of spectacular short-term moves.
The basic idea is, chances are excellent for triple-digit gains within a 12-month period – sometime in the next five years. Here's how you should think about it...
China's stock market has delivered triple-digit percentage gains – three separate times – since 2006... all within the course of a year.
There's a strong likelihood that China is going to rise by triple digits in 12 months again – sometime in the next five years.
Chinese stocks have a history of these kind of booms. Take a look at this chart of the Shanghai Composite Index...
My boss Porter Stansberry said it best when we launched China Opportunities last fall...
The thing that's so exciting about [China] is you can get 10 or 15 years' worth of market appreciation in less than six months. I don't know if it's going to happen tomorrow or if it'll happen six months from now, but this will absolutely happen again.
Porter is exactly right... When China booms, it really booms. The chart shows it. And I fully expect to see another quick, triple-digit boom in China at some point in the next five years.
Our MSCI story will take years to fully play out. But we can make incredible profits in the meantime.
Importantly, we're only a few weeks away from the day of reckoning. We're only a few weeks away from what I believe will be the first step in MSCI's long-term plan.
This is an exciting time. A known shift of up to a trillion dollars into Chinese stocks could be the spark that sets off the next triple-digit move.
And based on what we've seen in our portfolio so far this year, that major move could already be beginning...
Good investing,
Steve Sjuggerud
Editor's note: Steve believes $1 trillion of investment dollars is set to flow into China starting almost immediately. And his True Wealth China Opportunities portfolio is the single best way to profit. He believes early investors are positioned to gain 500% or even 1,000% over the next few years as this massive change unfolds. Learn more about Steve's thesis – and how to take advantage of a special limited-time offer – right here.