Investors who sit on cash should consider using some of it to increase their stockholdings.
- We have had some inflation worries since autumn 2010 for the Chinese economy. I recommended to under weight Chinese stocks last autumn when they peaked. According to BCA analyst Yan Wang, inflation is caused mainly by food prices and not by wage increases. Since the recent food price increase is caused by weather patterns diminishing food supply, he thinks prices will decrease soon. Freeing Chinese policy makers from restraining economic policies. Moreover, Chinese stocks haven't done anything in the past two years. Below you see a chart of the Shanghai SE A Share Index.
Keep in mind that the Chinese economy is not having structural problems - massive debt - like developed economies (USA, Europe, and Japan).
- Another stock which is very attractively valued is the insurer Zurich Financial trading at a Price to Book of 1.3x and sports a dividend yield of 8.3%. The Swiss Government Benchmark Bond with maturity in 10 years is yielding 1.7%. Zurich is massively oversold as the chart below illustrates with a RSI of 26
Even if stocks are tading lower in the next few weeks - which I doubt - think of buying some more with some residual cash!
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