China’s Stunning Stock Market Comeback
Stocks continue to stabilize this week following another strong showing Wednesday.
The initial shock of the 737 MAX8 controversy is subsiding after the U.S. finally grounded the planes yesterday. Boeing Co. (NYSE:BA) even finished the trading day in the green.
Despite Boeing halting its slide, the Dow continues to lag the Nasdaq Composite and S&P 500 this week. In fact, the outperformance gap of more than 1.3% between the Dow and the S&P was the widest since 2014, MarketWatch notes.
“Moreover, the last time the S&P 500 outperformed the Dow by 0.65 percentage points or better on successive days was the two-day period ended March 18, 2009,” MarketWatch continues.
Can the tech-heavy Nasdaq continue its dominance over the blue chips this week? We’ll have to wait and see…
As the tech sector retakes the lead, the pot stock rally intensifies.
Aurora Cannabis Inc. (NYSE:ACB) took the prize Wednesday, as billionaire Nelson Peltz joins the company as a strategic advisor. Peltz will work with Aurora to “explore potential partnerships and help with the its global expansion strategy,” Business Insider reports.
Investors are clearly happy with Peltz joining the team. Aurora shares rallied 14% by the closing bell to new year-to-date highs.
Meanwhile, our Canopy Growth Corp. (NYSE:CGC) trade continues to coil. Hopefully, a rising tide will help buoy the entire sector heading into the weekend. Either way, CGC remains on breakout watch.
While weed stocks continue to gain traction, Mike Burnick has his eye on China’s stunning stock market comeback.
The Shanghai Composite blasted to a gain of more than 23% during the first two months of the year. But some investors don’t trust the rally — especially since there’s still a chance US-China trade talks fall apart.
But Mike’s not worried.
“Trade alone isn’t the only reason why Chinese stocks are performing so well, or even the main reason,” he explains. “I won’t say U.S.-China trade tensions are a nonissue for Chinese stocks. But the story definitely takes a back seat to a more fundamentally important story.”
Here’s the deal: Last year, Morgan Stanley Capital Intl. made the momentous decision to add Chinese mainland stocks (known as A-Shares) to its popular MSCI Emerging Markets Index for the very first time, Mike explains. And when MSCI makes a move, index-tracking investors must buy, pouring $523.7 million into ASHR in the past four weeks alone.
“This could only be the tip of the iceberg,” Mike concludes. “A few weeks ago MSCI announced it will more than quadruple the weighting of China A-Shares included in the MSCI Emerging Markets Index by November.”
This means an estimated $125 billion should flow into A-Share stocks over the next eight months, pushing the new bull market even higher.
It’s just about time for the next big move…
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