Investors Betting on China Trough

China Urban Population Set to Explode — How to Play It?
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More are jumping on the "China has troughed" bandwagon; Hong Kong is at 52-week highs.

I noted Wednesday morning that our futures were up overnight, as Chinese "Flash" PMI came in better than expected. At 49.1, it is likely a month or so away from going over 50, indicating expansion.

China data has been choppy, but some investors have clearly begun betting on a bottom after a very ugly year for Chinese equities.

(Read more: China Hints at Reform By Dropping Mao's Legacy)

Since hitting a 3.5 year low in September, the Shanghai Index (where only domestic traders can play) is up 5.8 percent.

Hong Kong's Hang Seng Index (where international investors can trade) bottomed a year ago and is at a 52-week high today, up nine straight days (!). (Read more:

A number of strategists have turned more constructive on China:

1) Don Straszheim at ISI this morning made a "positive call" on buying China stocks. His reasoning: "1) Worst of economic slowdown is over. 2) Worst of profit decline also over. 3) China leadership change a fresh start. 4) Coming policy stimulus/ease are positives. 5) P/E at 12, versus historical average 27. 6) Optimism that 6, 12 months out the economic environment will have improved."

(Read more: China Property Loans Surge in Third Quarter)

2) Daiwa, in a note this morning, reiterated its opinion that China's economy had "hit the trough."

3) KGI said "China's economy is on a short-term upturn" and projected GDP would accelerate in the next two quarters: "As the economy picks up, cyclicals and mid and low-end consumer segments will be among the first to benefit from increased demand and price recovery."

(Read more: Hong Kong Intervenes for Second Time to Defend Peg)

Good call, but it's already happening: "risk on" names (coal, steel, cement and other commodities) have outperformed defensive names in China since the end of August.

—By CNBC's Bob Pisani

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