Investors all over the world are distracted by Chinese economic growth – or a perceived lack of it.
We just learned that China finished 2015 with GDP growth of 6.9%, compared with 7.3% in 2014. That's a drop of less than half of one percent, but the negative headlines have done their damage.
But those scary headlines that have investors so nervous are going to help us reap maximum gains from a Chinese sector that most investors are too worried to look into.
Because the truth is, China remains one of the world's fastest-growing major economies. It's expanding at three times the speed of the United States' economy, and six times as fast as the European Union's.
Our opportunity is in a sector that's growing even faster than that. Let me show you…
China Is an Unstoppable Economic Juggernaut
It's important to remember that worries about China started with a purely financial event, when the People's Bank of China guided the yuan lower to make it more competitive with the surging U.S. dollar.
China is still turning in enviable growth rates by Western standards. Automotive sales, for instance, driven by tax incentives jumped 18% in December over the year before. And that was the third straight month of double-digit growth.
Economists are predicting that annual retail sales growth rose some 11.3% in December, up slightly from the previous month's growth of 11.2%.
And over the long haul, e-commerce will do particularly well as the nation undergoes a massive change from rural to big-city focus and the rise of a tech-centric middle class.
Forrester notes that online sales, including those from mobile devices, stood at roughly $307 billion in 2014. By 2019, that figure will more than triple to $1 trillion.
Forward-thinking, profit-conscious companies all over the world are jumping on the growth China is experiencing now.
Uber Is Taking China from the Top Down
That's why the recent news that Uber raised more funds in China with a projected value in that market of $7 billion is so important.
It's already started 2016 with a major initiative. The company is already operating in 22 major Chinese cities, and it is now moving into the secondary and tertiary cities in the People's Republic.
Uber is planning to launch in 15 new cities in Sichuan province by the Chinese Lunar New Year on Feb. 8, 2016.
Sichuan is home to 80 million people and its capital, Chengdu, is Uber's top city in the world after only nine months in business there.
And that is just the beginning of Uber's ambition. It plans to be in 100 cities in China by the end of this year. That is some significant growth.
But the twist is, that for all this potential that Uber is exploiting in China, you can't invest in Uber or Uber China.
Fortunately, I know of an even better way to access the continued growth in China.
Here's Our Chance to Capture This Amazing Growth
And that's why I'm so bullish on the Emerging Markets Internet and Ecommerce ETF (NSYE Arca: EMQQ).
This exchange-traded fund is based off the Emerging Markets Internet and Ecommerce Index. This is a group of companies that derive at least half of their revenue from emerging markets and frontier economies and have at least a $300 million market cap.
EMQQ can't take more than an 8% position in any one stock. It's passively traded, meaning that positions in the ETF reflect the companies in the index; the fund determines the position size of each investment and then rebalances those positions every six months.
And the reason these markets are so compelling is that this is where the significant growth will occur for the next decade. Developed markets like the United States and Europe are thick with consumer products and electronic gadgets.
But emerging and frontier markets are just coming up to these consumption levels.
In 2010, world consumption was split $12 trillion to $26 trillion in favor of developed economies. By 2025, the projection is a $30 trillion to $34 trillion split.
That means developing economies will almost triple while developed economies will add a mere 25% over the next decade.
EMQQ's top holdings include Chinese e-commerce stars Alibaba Group Holding Ltd. (NYSE: BABA), Tencent Holdings Ltd. (OTCMKTS: TCTZF), JD.com Inc. (Nasdaq ADR:JD), and South Korea's Naver Corp. (OTCMKTS: NHNCF).
It also holds some of the most compelling stocks in rapidly growing sectors like Ctrip.com International Inc. (Nasdaq ADR: CTRP) – the Expedia Inc. (Nasdaq: EXPE), Priceline Group Inc. (Nasdaq: PCLN), and Orbitz Worldwide Inc. (Nasdaq: OWW) of China all wrapped into one.
As with most sectors, the air travel market is growing at stunning rates in China. China is already the second-largest air travel market and, according to the International Air Travel Association, will overtake the U.S. market within the two decades.
Bitauto Holding Ltd. (Nasdaq: BITA) is another player in a booming Chinese e-commerce sector. The company offers Internet content and online marketing services to the auto industry. A report by industrial consultants McKinsey & Company predict that SUV sales will triple by 2020, although passenger cars will still make up the majority of the market. And China is expected to contribute 34% of overall growth in the sector over the next five years. North America is a mere 14%.
Qihoo 360 Technology Co. Ltd. (NYSE: QIHU) is another company that is favorite in EMQQ. Qihoo is a homegrown Chinese cybersecurity company. And that's a very big deal given the lack of trust between the United States and China regarding cybersecurity. The Americans think Chinese software and hardware has spyware and the Chinese think the same of Americans. This makes Qihoo a winner for 1.4 billion Chinese and all their devices.
Simply put, given the dour mood on Wall Street, especially toward China, there are few better contrarian picks available than EMQQ.
If you're still a bit skittish, just buy a little bit every month for a while to make sure you get in at a good price.
Either way you do it, you are bound to profit by taking advantage of the long-term upside in China's growing web and e-commerce sectors.
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About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.