Watch for a big bounce in the emerging markets vs. domestic markets indexes today as suddenly the view is China is making major structural changes towards a market economy.
Shenzen cellphone market, China
While I was pleased with last week’s Plenum I have taken a much more realistic view on actual change and the timing of that change.
Having said that, emerging markets (EMM, quote) were oversold on the Fed and fund flows sent up a very clear flashing BUY signal. As I stated on Fast Money on Friday, no emerging market rally of significance can exist without China.
Shanghai was +3% last night at October highs. Chinese consumer focused stocks remain in the spotlight. Chinese internet stocks have been ripping and in some cases with justifiable valuations.
Watch for a few of the heavyweights in Chinese ETF FXI (quote) to also outperform. China Mobile (CHL, quote) could just be one of them.
Meanwhile the rest of emerging markets are also getting attention and upgrades form the street.
Perennially cheap Russia (RSX, quote) was just upgraded by JPM.
I would avoid crowded trades like Mexico and South Africa and look to places like Turkey and even Indonesia they have the ability to rally back here.
