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For understandable reasons, Chinese stocks have been beaten down for over two years. But things are changing in China, and now there are good reasons to play these former losers again.
Just don't expect it to be a one-way ticket back to all-time highs. That won't happen. Instead, you're going to see a wave of extreme volatility as their chaotic economic conditions keep changing, a yo-yo effect of skyrocketing pops followed by deep pullbacks.
But I always say that if you're flexible and paying attention, you can make money regardless of what the market does. This situation is no different, and in fact, if you follow the momentum closely, you can play both the upswings and downturns to make gains in both directions.
Here's everything you need to know: what's changed in China that makes Chinese stocks worth jumping into again, why it won't be a one-way ride, and how to position yourself for success as the markets rise and when they inevitably fall.
Why Chinese Stocks Are Pushing Higher
The most apparent change in China causing equities to surge is the Chinese Communist Party (CCP) dismantling the country's uber-strict zero-Covid policies.
Only two months ago, after the National People's Congress re-elected Xi Jinping to a third term as China's president, Xi strongly reiterated his commitment to the zero-Covid policy regime he originated and championed.
But he relented in the face of social unrest. Riots broke out inside Zhengzhou's giant iPhone manufacturing hub, where over 200,000 people assemble Apple phones, because the workers were locked down without access to medical help. More protests in big cities followed, and finally, ten people died during a blaze in a locked-down residence in Xinjiang.
In early November, China announced 20 key parameters to guide officials in easing the country's burdensome zero-Covid policy apparatus. They included: cutting isolation for close contacts of infected people to five days at a central facility and three days at home as opposed to seven days in a facility; removing mass testing in most areas; scrapping circuit breaker bans for incoming flights and reducing pre-flight PCR testing to one test from two; and implementing pandemic control measures in industrial parks to ensure smooth supply chain operations.
Riots in Zhengzhou proved new controls in industrial parks an instant bust.
Last week the State Council announced it was going to revisit the country's Covid policies and practices.
This week, in typical CCP fashion, they passed the blame to local governments as a response to public's "strong reaction" to the failure of officials "to properly implement earlier directives aimed at easing the burden of pandemic controls on people's lives." Li Bin, deputy director of China's National Health Commission, announced a slew of policy changes:
- New State Council rules curtailing the power of local authorities to shut down entire city blocks
- Allowing Covid patients with mild conditions or who are asymptomatic and their close contacts to isolate at home instead of in quarantine facilities (which are supposedly being dismantled…
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About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.