Asian stocks are very strong today. China has been a storm system on my weather map for a while. I am not a fan of the forced revaluation last week. Fixed rates were much more stable for both China and the U.S.
I do like the way China has managed it, though. It left the currency not convertible–still capital controls in pace–which makes speculating much more difficult and costly for a speculator who wants to move big money into the RMB. The Chinese central bank also engaged in open-mouth operations yesterday saying no more revaluations. And moving to a currency basket shifted some of the political pressure from the U.S. to Japan and the EU, both of which trade more with china than we do. If you look closely, you will see the shadow of Robert Mundell in the press release. Bob is an advisor to Chinese officials there. There is no one better.
I like placing the China bet through EPP (the exchange traded fund for the Pacific Rim excluding Japan.) Is holds the stock markets of Australia, New Zealand, Singapore and Hong Kong. I have an EPP position that’s up 22% since October; another is up 39% in 18 months. I am not selling either one.
I also like EWY, the ETF for Korea, China’s major technology source. Korea (EWY) is the epicenter of telecom-equipment R&D and is the driving force behind mobile-phone production in China, where 300 million cell phones will be sold this year. I own some EWY up 42% since last September and still like it. I also like Japan (EWJ) where companies are just beginning to pay dividends.
JR
