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China slowed-growth worries have created a buying opportunity for long-term China. Relative to other international equities – China has value in developed as well as emerging market funds. Investors should consider allocating more capital out of the US which is trading at premium valuations into China trading below historic valuations. Haven’t you heard? Chinese GDP growth is slowing – run for the hills. These seems to be the consensus as Chinese equity markets have taken a plunge YTD . Examine the five-year chart of some popular Chinese ETFs (exchange-traded-funds). (click to enlarge) This dip has created an excellent buying opportunity for certain regions of the world, with China being my top pick. To start I took a look at the major countries and examined the broad ETFs that tracked the respective countries. From there I looked at the sales growth in the funds and removed negative sales; since the focus here is on growth at a reasonable price. From there I accessed data from Worldbank to gather historic and future estimated GDP growth. The results are below, filtered on an average PEG score from low to high. (click to enlarge) China remains my top pick because while growth is slowing; it is still growth! The next four year average growth estimate is still above 7%, with a P/E that is roughly half of the S&P 500. The middle-class continues to expand and disposable income has been on a healthy upward trend. Funds that should do well in the next decade include: SPDR S&P China ETF (NYSEARCA: GXC ), iShares China Large-Cap ETF (NYSEARCA: FXI ), iShares MSCI China ETF (NYSEARCA: MCHI ), and iShares MSCI Hong Kong ETF (NYSEARCA: EWH ). The first three funds are very similar as they are invested primarily in China emerging markets, whereas is 94% developed markets and only 6% emerging. Investors may want to consider one developed and one emerging – which both look attractive after the market correction. If you just want broad exposure to the Asia Pacific region I would recommend the low expense and reasonably valued Vanguard Pacific VIPERS (NYSEARCA: VPL ). This fund is 63% Japan, 18% Australia, 17% Asia developed and 2% Asia emerging. Another interesting way to play China while taking on more firm-specific risk would be to buy a familiar U.S. company with exposure to China. The chart below shows restaurant companies operating income across varied geographic regions: (click to enlarge) My favorite picks in the above list are Starbucks (NASDAQ: SBUX ) with a PEG of 1.6 and Yum! Brands (NYSE: YUM ) with a PEG of 1.7. Other ideas to buy at a discount to the recent selloff with exposure to China include Boeing (NYSE: BA ) who will most likely be unscathed by slightly less growth in this region. Resort companies such as Las Vegas Sands (NYSE: LVS ) or MGM Resorts International (NYSE: MGM ) have fallen more than I would have expected considering the peculiar fact that people tend to continue to gamble even in periods of economic downturns. My prediction is that gambling in the Macau region will pick up and buying now is a good opportunity for the next decade. (click to enlarge) I’m sure there are numerous ways you can conjure to play a re-bound in the Chinese sell-off. I’m interested to hear your comments on what you think the best way to play a rebound in China is. Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in FXI,GXC,SBUX,YUM,LVS, MCHI over the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Scalper1 News
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