China's 'National Team' Comes to the Rescue

Editor's note: Chinese stocks are falling on rumors of a trade war between China and the U.S.

But as True Wealth China Opportunities editor Steve Sjuggerud explained in yesterday's Masters Series essay, investors are overreacting.

In today's Masters Series – originally published in the March 26 edition of our free DailyWealth e-letter – Steve explains how the Chinese government is propping up its stock market... and shares one of his favorite "one click" ways to invest in China today...

China's 'National Team' Comes to the Rescue
By Steve Sjuggerud, editor, True Wealth China Opportunities

China's government just intervened in the stock market...

That might sound like an extreme thing to do. But with all the talk of trade wars with the U.S., Chinese stocks were falling – until China's "National Team" of state-backed investors stepped in and started buying blue-chip Chinese companies to prop up the market.

"China's so-called National Team of state funds has a long history of smoothing swings in the country's $7.7 trillion stock market, particularly during big down days," Bloomberg News wrote.

It might seem like Big Brother is stepping in... which is typically not a good thing.

But governments do it all the time... and it's often worked...

For example, Japan's central bank now owns 75% of Japanese exchange-traded fund ("ETF") assets. It owned zero ETFs less than a decade ago.

And Japan's stock-buying has certainly helped push Japanese stocks higher. Japan's benchmark stock index hit 26-year highs in January.

Likewise, China's National Team has historically bought huge chunks of the Chinese market...

In 2015 – one of the last times it happened – CNBC reported: "One member of the team, China Securities Finance Corp, the main conduit for the injection of government funds, owned 742 different stocks at the end of September, up from only two at the end of June."

This time, the group began buying blue-chip names including China Life Insurance and China Petroleum & Chemical.

It worked... By the end of the week, both of those stocks bounced back from their morning lows. And China's large-cap index lessened its drop to 2.9% from 4.6%.

Investors are scared. But instead of being scared, we should see this as a buying opportunity for Chinese A-shares...

Chinese stocks are getting a huge tailwind...

Right now, China's government is buying Chinese stocks. And very soon, large international investors are going to start buying Chinese stocks, too.

You see, index provider MSCI is about to start including Chinese stocks in its benchmark emerging markets index. The first round of inclusion happens in May, just a couple of months from now.

So we have a situation where investors are scared, but we KNOW there is a "backstop" or "floor" to the markets – courtesy of the government buying stocks and international investors about to buy.

Plus, I believe all this "trade war" talk will go away...

I could be wrong, of course. But a trade war would only hurt both countries. Instead, I expect it's mostly posturing to get some sort of concessions.

Regardless, China's National Team will keep buying to prop up the markets. And big institutions will start buying soon, as the MSCI's inclusion is around the corner.

Let's get our money there first.

The easiest way to do it is to invest in a fund that is benchmarked to the MSCI China A Inclusion Index. That means it owns the stocks that will be included... and that will benefit as institutional money starts flooding in. That fund is the KraneShares Bosera MSCI China A Fund (KBA).

This is a great moment – a great opportunity. Take advantage of it...

Good investing,

Steve Sjuggerud

Editor's note: Steve says a potential trade war between the U.S. and China has created a huge opportunity for investors. Folks who understand what's likely to happen next – and follow Steve's advice – could be sitting on triple-digit gains... and quickly. He just put together a brand-new presentation explaining this story. But you must act fast... This offer expires TONIGHT at midnight. Click here for the details (without sitting through a long promotional video).