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Strategists Urge Caution in China Investments

An overnight selloff in the Chinese market caused the Shanghai Composite Index to fall 6.5%, just one day after hitting all-time highs. Marc Pado, U.S. market strategist at Cantor Fitzgerald, and J.J. Burns, president of J.J. Burns & Company, joined CNBC’s Mark Haines on “Morning Call,” to discuss whether the exuberance that has driven China’s stock rally will evaporate and hurt global markets.

While Burns believes China’s market will have an impact elsewhere, he points out that institutions have been careful in asset allocating. "We’ve heard recently that institutions are starting to limit their exposure to China, so we’ve seen our own managers start to take some of the profits off the table,” said Burns. “I see that there is more of a boom going on than the boom going to a bust,” he said, adding, “however, I would not be a stock picker in this kind of market.”

Pado believes that China's selloff will not affect the U.S. markets. “I think those involved know the risks and it won’t spread -- and is not something that we have to worry about with the U.S. markets,” said Pado, “the U.S. markets should not be impacted by the retail investing that’s going on over in China.”

Pado encourages retail investors to put their money in U.S. stocks and areas that are “safe.” For investing in China, he recommends a broad-based fund with professional management or an ETF. “You don’t want to pick individual stocks, you get burned very badly by doing that,” said Pado.