Bullish on China, Let's get cyclical, cyclical, I want to get cyclical...

We are clearly seeing signs of economic recovery in China. Obviously, the $800B stimulus package which they smartly focused on key industries like autos, steel, agriculture, etc is making a difference. We've been following statistics coming out of China and most of them are very bullish. Clearly, one needs to be careful when dealing with communist government statistics, but what they are clearly doing right, is both expanding bank lending and stimulating key industries through direct investment, subsidies, rebates and tax cuts. This should lead to a stronger recovery. Speaking of recovery, the 5%-6% GDP growth that I think we will likely see in China this year, may not be as ambitious 9%-11% growth of the past few years, and may actually come short of 8% growth that Chinese government is hoping for. Still, it will likely be the best GDP growth on the planet this year. Period.

Just this morning, China reported an extremely bullish auto statistic. China auto sales hit a monthly record of 1.11 million, exceeding US monthly sales for the third month in the row. Specifically, they government halved taxes on purchases of small autos and on subsidies for purchases of light trucks in rural areas.

I am hearing of utilization rates at the steel mills back to pre-meltdown levels. Real estate is beginning to show some signs of life, as evident by both pick up in construction and transactions in 2nd tier cities (like Xian for example). More demand for steel, coal, power, iron ore, crude, aluminium....

Based on this theory I am beginning to rebuild my portfolio to include a number of Chinese companies that trade in US. I am buying a small basket of a few cyclical names, to start. Each of these names passed my initial test. Once I have more time to dig in, I will be adding to some of these positions and will likely double and triple some of them. I am not chasing them here, but would buy when they settle down a bit.

Here are some of the names:

WH, GSI, WATG, CPSL, HRBN,