Chinese stocks may present a buying opportunity

The Dow Jones Index drops 370 points, financial stocks are being hit hard, and the service sector index hit a low not seen since 9/11. That feels bad, and it bodes is for the economy. We all know that, as does the world markets.

"This was certainly an unexpected piece of bad news. The magnitude of the miss below the estimates really got people’s attention," said Michael James, senior equity trader at Wedbush Morgan Securities in Los Angeles.

The FTSE 100 Index lost 158.20 points, Hang Seng index plunged 1,339.24 points, or 5.4 percent, to close the half-day session at 23,469.46. Japan's Nikkei 225 index tumbled 4.7 percent to 13,099.24. And that’s just the immediate reaction.

"It's unbridled pessimism," said Francis Lun, general manager at Fulbright Securities Ltd. in Hong Kong. "Everyone is concentrating on a U.S. recession, but Europe is also looking bad.... We are in for a bear market now."

Now that you’ve had the shock, focus on the positives. For China stocks there are several items that may bode well. Obviously there is the fact that the Olympics will help draw new revenues to hundreds of businesses and industries. It’s a spark to the economy that definitely going to be a cushion regardless of the American economy at the time. But that is a short boost and limited in its scope.

There of course is the news that besides the pressure coming from America in recent weeks, there is a national crisis in the form of winter storms that have hit the lowest temperatures in 100 years.

"In northern China we have quite a good emergency plan to cope with unusual weather conditions. But in southern parts of China, the mechanism and emergency plan to cope with such weather needs to be improved," said head of the Chinese Meteorological Administration, Zheng Guoguang.

In the midst of such gloom and serious causes of concern, and with so few glimmers of upside hope in the near future bears normally rule. But, besides the bears, savvy bull market investors have to be happy. This is a market that in some ways mirrors what I saw as the reaction of some investors after 9/11. While many panicked and sold, a small few searched and picked the sturdiest of industries to get into. Not huge positions all at once, but a piece here and there as the prices went lower and lower.

Now I know I’ve questioned the growth in China for some time. I realize that their may well be limiting factors, and the American Economy ranks high among them. But with world stock market prices getting hit again, European markets being shaky, low interest rates, and the 54 billion Yuan cost of this unforeseen and devastating winter storm, I like the opportunity.

Is this the perfect time? Never, such a thing does not exist. But a smart plan, taking the best companies in fields that are and will be hardest hit shortly, involves taking disaster and world turmoil and turning it into a long-term profit center. While some may look for the quick boost to the service sector, and transportation, I think financials are the key along with mining.

Time will tell if these sectors will end the year up, but considering that by the end of the quarter both should be hit hard it’s attractive to me. But again, that’s only if you think buying in troubled times is a useful part of your overall portfolio plan, and you expect China and world markets to regain some of the strength they have lost.