How to Trade China's Transition

How to Trade China's Transition
Getty Images

China will undergo a major political transition at the end of the week, and this pro has a trading plan.

In case the U.S. election isn't providing enough market event risk for the coming week, there is also the small matter of a generational changeover in China's leadership. The current vice president, Xi Jinping, will take over and scores of other posts will change hands.

So how do you trade the transition, especially given the slowing growth in China?

Andrew Busch, global currency and public policy strategist at BMO Capital Markets, says a play on disappointment in China is the way to go. He predicts that the country's stimulus efforts in recent months will continue, but "my view is that they're not going to provide enough to really get these commodity currencies or Aussie, kiwi, Canada to get juiced from it."

So Busch told CNBC's Melissa Lee he wants to sell the New Zealand dollar against the dollar, entering at 0.8265 with a stop at 0.8315 and a target of 0.8115.

Rebecca Patterson, chief investment officer at Bessemer Trust, is more bullish on China. She notes that Taiwan and Korea have seen their business sentiment indicators turn more positive, and reports from companies like Caterpillar and BHP are "suggesting that the prospects for China are looking better."

But Busch says near-term economic reports from China on retail sales, foreign investment and inflation could also bolster his trade if they "come in a little weaker than expected."

Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm and repeats on Saturdays at 7pm.

Learn more: The essential vocabulary for currency trading is on Key Terms Dictionary. Top currency strategies are broken down for you in Currency Class.

Talk back: Tell us what you want to hear about - email us at