Red-Hot Resources

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Thursday, April 19, 2007

China's Tiger Starts to Scare People

China's gross domestic product (GDP) grew 11.1% in the first quarter -- blowing past estimates. It's also 0.7% higher than year-ago levels. What's more, the Consumer Price Index, a gauge of inflation, climbed 3.3 percent in March versus a central bank target of 3% for 2007. That's the highest inflation rate in more than two years.

Investors reacted by selling EVERYTHING. Shanghai's index dropped by nearly 5%. Australia's stocks fell by 1.2%. Why are investors selling when things are going so well? They fear that too-hot growth and higher inflation will
make Bejing take steps to cool off the economy. Ri-i-i-i-ight!

I believe that if China was going to take serious steps to cool off its economy -- as opposed to jawboning and windowdressing, like it has been doing -- it would already have done so. I also believe China doesn't want to upset the applecart before Beijing hosts the Olympics in 2008.

So what does this make this sell-off, as a tidal wave of red roars around the globe? You guessed it -- buying opportunity.

Let's look at a chart of the FXI, one of the China ETFs ...
I'm not saying this is guaranteed -- nothing is. But history tends to rhyme, as they say.

Indeed, if one were going to "Profit from China Megatrends," (nudge-nudge), this would be a good time to get started.

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