Don't Dawdle - Big Risk-On Rally Coming in China: Pro
You’ve heard every reason why China has lost its mojo. What if the conventional wisdom is completely wrong?
David Riedel of Riedel Research Group thinks that's the case.
"I think it’s very dangerous to think about shorting the economies that are the healthiest in the world and that have the biggest reserves in the world," he says on CNBC's Fast Money Halftime Report.
"If you bet against China you’re betting against a system that has delivered a lot of value of the past 30 years."
Riedel says get long - add to positions, and do it now or miss the next bull.
“We’ve seen a huge upswing in the MNI China consumer sentiment index which we think is the best gauge of consumer sentiment on the ground in China,” he explains.
And according to Riedel, the data point is very meaningful.
“We’ve looked back at a long history of consumer sentiment indexes from around the world and we’ve looked at what happens after sentiment gets a shock from events such as 9-11, Lehman or the euro collapse. And then we looked at how many months it takes for sentiment to rebuild after the shock.”
His proprietary research suggests that with the MNI data where it is -- appetite for risk is at an inflection point and barring any major crisis, investors are about to embrace more risk - a lot more.
“That combined with improving sentiment around the world and we think we’re building toward emerging market outperformance in the coming months.”
As we mentioned above, Riedel thinks the time to position for the next wave is now – in fact he thinks there’s little time to spare.
“We would be building positions now getting ready for a more risk-on environment, which we think is coming as soon as October and November.”
And if you’re wondering what he’s buying, he’s looking for beta. “I want to be more aggressive,” he says. "Look at Sina, Tencent Holdings (which trades in Hong Kong) and other aggressive high flier names.”
Trader Josh Brown, author of The Reformed Broker blog, is too. But he suggests dipping a toe not diving in the pool. “I wouldn’t play individual Chinese names – I’m skeptical of their accounting. If you really want to play EM do it with an ETF. My favorite is DEM . It weights EM companies based on dividends. And it’s hard to fake dividends.” he says.
Posted by CNBC's Lee Brodie
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Trader disclosure: On July 19, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Stephanie Link is long AAPL; Stephanie Link is long EBAY; Stephanie Link is long CVS; Stephanie Link is long JPM; Stephanie Link is long STI; Stephanie Link is long MCD; Stephanie Link is long WY; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Josh Brown is long AAPL; Josh Brown is long JPM; Josh Brown is long GDX; Josh Brown is long GLD; Josh Brown is long XLU; Josh Brown is long XLF; Josh Brown is long WMT; Josh Brown is long TGT; Josh Brown is long MCD; Josh Brown is long QCOM; Mike Murphy is long FB; Mike Murphy is long EBAY; Mike Murphy is long TOL; Mike Murphy is long LEN; Mike Murphy is long SWK PUTS; Mike Murphy is long EMC; Mike Murphy is long URI
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CNBC.com with wires.