China's Historic Moment Is Almost Here
China's historic moment is almost here... The first 'tidal wave' is about to begin... Why A-shares could soar in the next few months... Steve's favorite way to profit from 'trade war' fears...
Regular Digest readers know it was one of the highest-conviction ideas of Steve Sjuggerud's career...
We're referring to his bold prediction that global index provider MSCI would agree to add domestic Chinese stocks – known as "A-shares" – to its emerging markets index last year... and that these stocks were practically guaranteed to move higher as a result.
As Steve himself explained in the May 6 edition of our weekend Digest Masters Series last spring...
June 20, 2017 will be one of the most important days in the history of investing... 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.
Of course, Steve was exactly right...
On Tuesday, June 20 at 4:30 p.m. Eastern time, MSCI made it official. It would begin to add Chinese A-shares to its benchmark emerging markets index approximately one year later in mid-2018.
More important, shares have rallied dramatically, just as Steve predicted. Despite recent fears of a "trade war" with China, subscribers who took his advice are up more than 20% so far.
But if you aren't among them, Steve has some great news: You haven't missed anything yet. He believes the biggest gains are still ahead...
You see, the first 'tidal wave' of money into Chinese A-shares is about to begin...
Remember, MSCI only announced this move last June. But it won't actually start buying these stocks for another couple of months... And history suggests these stocks could absolutely soar in the meantime. As Steve explained in his latest issue of True Wealth China Opportunities last month...
MSCI handles changes to its indexes all the time. It moves countries up and down its rankings every few years.
The last two countries MSCI elevated were Qatar and the United Arab Emirates (UAE). Both were considered frontier markets – or developing countries that are too small to reach the next category – until MSCI announced in 2013 that it would re-classify them as emerging markets.
In both cases, these countries had massive rallies after MSCI's announcement through the day inclusion began. Take a look...
As Steve noted, these were significant rallies...
Qatar rallied more than 50% over this period, while the UAE nearly doubled.
But take another look at that chart. You'll also notice that the gains began to accelerate in April 2014. More from Steve...
The hype an index gets when the flood of money from MSCI is coming is huge. And the biggest gains tend to happen right at the end.
You can see it in the chart below. Most of the gains for both indexes happened in less than three months leading up to inclusion...
In short, both these indexes saw more than half their massive returns in the final few months before MSCI started buying.
This is great news for Steve's favorite A-share investments.
But it gets even better...
We mentioned the recent fears of a trade war between the U.S and China. As regular readers know, many of Steve's favorite China opportunities – including these A-shares investments – have fallen 10% or more as tensions have risen over the past several weeks.
But you also know Steve believes these fears are overblown. In reality, Chinese stocks enjoyed a massive rally over the past year, and were overdue for a correction.
Tariffs are a convenient excuse, but Steve believes a real trade war is unlikely. As he explained in the March 27 Digest...
You probably noticed that many of our investments took a quick dip after Trump's announcements. Some of them are still struggling.
Here's my opinion today... This is a great buying opportunity.
Right now, China's retaliation is weak. Its $3 billion tariff is nothing in the face of the $172 billion in U.S. exports China is expected to buy this year... Or in the face of the $568 billion gap between how much the U.S. imported in goods and services last year compared with its exports. It all seems like posturing...
In short, we want to have our money in China today. The new tariffs will most likely amount to nothing more than a buying opportunity.
In other words, Steve believes the recent correction is a rare second chance to buy Chinese stocks at a significant discount, just before the MSCI "hype" rally begins. And it could be one for the record books...
According to news service Reuters, Chinese fund managers have slashed their equity exposure to the lowest level in 18 months. Even Chinese investors don't want to own these stocks right now... which means the rush back into A-shares over the next few months could be incredible.
Of course, A-shares aren't alone...
Thanks to the recent selloff, all 22 of Steve's top China recommendations are "on sale," and he rates them all strong buys today. If you missed out on the big rally last year, this could be your last great chance to get on board this multiyear bull market.
To be sure every interested reader has one last chance to take advantage, Steve has agreed to open up his True Wealth China Opportunities service to new subscribers at the best price we have ever offered. But please note, this special offer will only be available for a few days. Click here for all the details.
New 52-week highs (as of 4/2/18): short position in Sprint (S).
The (mostly) positive feedback on the "Porter vs David A." debate continues to roll in. Send your kudos and criticisms to feedback@stansberryresearch.com. Good or bad, we read every letter.
"Like the others, Porter's response to David A was so on target that I forwarded it to several in my family. Also wanted to mention that I can see a common thread with much of what he said, with some of both Bill Bonner's and Doug Casey's comments on the current predicament in the US. I agree wholeheartedly!! Keep up telling us what we need to hear. Thanks." – Paid-up subscriber Sam B.
"Reading the mailbag I feel I must be in a small minority of Stansberry subscribers who did not think Porter's response to 'David A' was persuasive or even logical. We live in a democracy, and for all the flaws of democracy, mankind has devised no better governing system, and many much worse. A democracy provides the only known source of government legitimacy, the majority vote.
"If you don't want to continue pouring billions into our bloated military, you need to stop voting for the Republicans, who have made increasing military expenditure a key platform since at least Reagan. People want this and continue to vote for it.
"As for the more Democratic party supported social programs of Medicare, Medicaid, and Social Security, which together with the military and interest on the debt constitute well over 80% of the federal budget, again, these programs are highly popular with the electorate and running against them would be a failing political platform. So the federal government is doing what the voters want it to do in maintaining these programs.
"It makes no sense to put forward the proposition, as Porter did, that somehow the federal government is a separate thing unto itself not related to the goodness of the American people. It responds to the voters. Porter's libertarian philosophy, however much beloved by Stansberry subscribers, cannot win an election." – Paid-up subscriber Robert P.
Brill comment: Actually, Robert, mankind has devised a better form of government. It's called a "constitutional republic." Perhaps you've heard of it?
Regards,
Justin Brill
Baltimore, Maryland
April 3, 2018