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Gaming China’s Surprise Move

A surprise move by China to cool down their overheated economy caught the Street off guard. How should you trade it?

For the second time in two months, Beijing announced plans to raise reserve requirements -- this time by 50 basis points, from 16.0% to 16.5%, effective February 25.

Although investors had been expecting an increase, few thought the second rise would come so soon. Markets were immediately rattled by the news as investors worried about the impact on companies around the globe.

The China policy move immediately boosted the U.S. dollar and knocked commodity prices and materials stocks; in turn both the Dow and S&P went tumbling.

What’s the trade?

For insights we turned to Zach Karabell of RiverTwice Research, who ran one of the most successful China-focused funds of the last decade.

He tells the desk, these events don’t change his fundamental thesis and that China is an enormous and growing engine of global growth. “I’d be a buyer of what China buys as an economy,” he says.

If you watch Fast Money regularly you know this is what Karabell often says. He’s a long-term investor and believes firmly that despite the daily ebb and flow of the market – global growth as a long term thesis remains solidly in tact.

As a result, “I’d look at Vale around $26. And I’d be a buyer of Cisco . And I established a position in Fluor around $40,” he says.

*Zack Karabell has many other valuable insights into China. Watch the video now for more.


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Trader disclosure: On February 12, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (BTU), (NUE); Kaminsky Owns (LULU); Finerman's Firm Is Short (IJR), (MDY), (SPY), (MDY), (USO), (UNG); Finerman Owns (AAPL); Finerman's Firm And Finerman Own (CVS); Finerman's Firm And Finerman Own (GOOG); Finerman's Firm Owns (MSFT); Finerman's Firm And Finerman Own (RIG); Finerman's Firm And Finerman Own (WFC) Preferred; Finerman's Firm And Finerman Own (JPM); Finerman's Firm Owns (STJ); Finerman's Firm Owns (BSX); Terranova Owns (JPM), (RIMM), (IBM), (QCOM), (PALM), (GOOG), (EMC), (AAPL), (DELL), (MSFT); Terranova Is Long Oil Futures (Dec. 2010 Contracts, Dec. 2011 Contracts)

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