A Forgotten Market With 23% Upside Potential

I visited China for the first time more than a decade ago...

A group of massive tech giants were reinventing the Chinese stock market. So I went to see the transformation with my own eyes.

The rest of the world hadn't realized the potential yet. Investors hated the idea of owning Chinese stocks... which meant these innovative giants were trading at big discounts.

Many of those stocks soared hundreds of percent. But the wheels have fallen off in recent years...

Chinese technology stocks dropped 70%-plus since the 2021 peak. Locally traded A-shares saw a similar decline. And even Hong Kong stocks – which are more established – fell by more than half.

Now, a reversal is underway. Specifically, Hong Kong stocks recently rallied for 10 straight days. And according to history, they're setting up for another 23% rally from here...

DailyWealth readers know it's crucial to follow the trend when investing. It's the simplest way to check your ego and avoid catastrophic mistakes.

You might find a great investment thesis... But if prices are still falling, you're either early or wrong. Simply waiting for prices to start rising will reduce your risk dramatically.

Similarly, watching an asset rally day after day gives you more information. It means the uptrend is strengthening, and explosive gains are possible.

That's what we're seeing right now in Hong Kong stocks. The benchmark Hang Seng Index recently rallied for 10 straight days. Take a look...

This was an impressive winning streak. It's pushing the Hang Seng closer to a one-year high. And it's also darn rare.

We've only seen 12 other streaks of 10-plus up days since the data begins in 1970. So these kinds of streaks only happen once every four to five years. (The last one was back in 2018.)

What's more, these rare winning streaks tend to kick off additional gains. Take a look at the results over history...

Hong Kong's stock market has a history of making investors wealthy. It has led to 9.3% annual gains over the past 50-plus years. But if you buy after streaks like this, you can crush that return.

Similar setups led to 7% gains in six months and 23% gains in a year. That's more than double the typical buy-and-hold return over the one-year period. And the market was up 83% of the time a year later, which means the odds of future gains are strong.

This shows the power of a strengthening uptrend. And after 10 straight days of gains, that's what we have in Hong Kong stocks right now.

Investors have left China for dead. But now, prices are reversing in a big way.

History shows the gains can continue in Hong Kong stocks. And that makes this a part of the world you should consider owning today.

Good investing,

Brett Eversole

Further Reading

"The theme of trend following has turned out to be one of the most important factors for successful trading," Greg Diamond writes. Here are two examples that highlight why sticking with the trend can be a game changer... Learn more here.

Investor sentiment toward the Chinese stock market has hit a "blood in the streets" level. And it can't get much worse from here. That's why now is a good time to start paying attention – before prices reverse to the upside... Read more here.