Time to Fade the U.S. and Shift Money Into China: Luschini


If the Wheel of Fortune is the most successful game show in television history, then the Wheel of Worry has to be the most predictable game in town when it comes to investing. Maybe it's just me, but doesn't it feel like the great investment risks of our time seem like they're on some kind of a wheel? They just keep popping up, one after the other, taking their turn dominating the sentiment and psyche of the money-making community.

No sooner than we say goodbye to Euro-phobia, the Federal Reserve derby comes in to play, only to be replaced a few days later by a data deluge or earnings season. As much as I am ready to buy a vowel, so to speak, and shake things up with some new market variables, I'm as certain as the sun rising tomorrow that by this time next week (once Fed-watch and QE3 is over and done with), we will be wringing our hands over the China Slowdown once again.

Either way, investors like Mark Luschini, chief investment strategist at Janney Capital say China looks attractive in spite of all the gloom and worry.

"We actually have recently argued that it is time for investors to fade in to Chinese equities," Luschini says in the attached video, on the expectation that the government will step in and try to stimulate economy. Given the dangers of overheating and the enormity of changing demand from external to internal, Luschini is not expecting a sharp and sudden snap-back following a three-year slump in the Shanghai Composite.

"Certainly not off to the races necessarily, but providing an entry point today we think might not likely be repeated," he predicts.

Where some are understandably shaken by the drop in trade reported Monday, where Chinese imports actually went negative and their once mighty export economy grew a scant 2.7%, Luschini thinks the oft-talked about ''hard landing'' is unlikely. His call is that the People's Bank of China will be forced into action to offset a combination of deteriorating economic growth, inflation that is still low but moving directionally higher, as well as decaying in industrial production.

"I think we're going to see baby steps here as opposed to some kind of shock and awe fiscal program," he expects of Beijing, warning that rate cuts and other actions will probably come slower than markets want. Even so, he says a three-year, 40% slump in Chinese stocks has made them more attractive.

"We would begin to fade U.S. equities and go to where the conditions look a little more ripe," he advises, highlighting European stocks, some of the Emerging Markets (EEM), and China in particular.

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