For China Exposure, Play the Field

 | Nov 01, 2012 | 3:36 PM EDT
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You believe in China? You believe in the FXI then. We've been buying the iShares FTSE China 25 Index ETF (FXI) for the Action Alerts PLUS charitable trust, even though it does have a lot of financials, because we want to play what could be a gigantic turn in China, and we don't want to have to bet on the wrong Chinese horse and get skunked by it.

I can't overestimate the importance of that Chinese PMI number we got last night, especially given that it was very unexpected by most of the cognoscenti. We have a combination of the new leadership coming in with the first upside surprise of data, and it's so potent and palpable that it's not enough to go with the usual derivatives, like Emerson Electric (EMR), Caterpillar (CAT), Vale (VALE) and Eaton (ETN), even as the trust owns those, too.

We all know the U.S. is holding in because of the consumer. We all know Europe is going away, because of the governmental paralysis. China had been the wild card. Just two months ago, I remarked on "Squawk on the Street" that I wondered who those economists were who kept predicting better things for China, because each data point was worse than the previous one.

Finally, though, that skein has been broken. The result is this terrific rally, and given how long the downturn has lasted, you can't believe that all you are going to get from the FXI is a move from $32 to $37. I think there is much more ahead, and that is why we keep putting money to work in the ETF, as you can see from this morning's note that was sent out before today's opening.

Given that we just got earnings from a host of companies that had bemoaned China's weakness, these new data don't fit the negativity or the short-selling. The green you see on your screen? That's the covering that could power us higher, and the best way to play China is, alas, China itself.

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