Last week China announced a comprehensive stimulus package that could potentially propel its economy and markets. This is happening in a context where the US economy is expected to slow down. The question to US investors is, could this generate a windfall for US stock markets? The short answer for active asset managers is YES; 88% of companies with high correlations to the FXI (Chinese Large cap index) generated positive results last week. This suggests opportunities for those willing to select stocks. As for passive investors, the situation is different, they will have to invest directly in China. The US market has not reacted that much in aggregate, with only 59% of companies posting positive results last week.
Performance and flows into key macro ETFs (FXI for China)
Below is a table with top performers of US Stock Markets last week. A common denominator was the strong correlation with Chinese Markets
Looking at Wynn Resorts (at stock the top of the list), we can clearly see its Chinese exposure
Using Investment Analytics' proprietary analysis tools, we describe the characteristics of each stock. Growth and therefore valuations will probably be adjusted as the dust settles, yet the summary provides clear insights for active managers to choose their exposure.
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