The \u201creason\u201d for the selling, if we are to believe the headlines, is that investors worry the People\u2019s Bank of China is orchestrating another cash crunch<\/a> to teach property speculators a lesson.\u00a0 Call it the risk of Chinese tapering, if you will, but it is not something I would spend a lot of time worrying about.\u00a0 The far more likely explanation is that, after rising by over 20% since July, Chinese stocks simply needed a breather.<\/p>\n I recommend you take advantage of this lull to accumulate shares of Chinese equities, whether it be via an ETF option like FXI or via purchases of your favorite individual Chinese stocks.\u00a0 The Chinese economy is showing signs of life again, and Chinese equities have been in a long, sideways correction for nearly four years (see chart).<\/p>\n After the long, multi-year correction, Chinese shares are now ridiculously cheap.\u00a0 By Financial Times<\/i> estimates<\/a>, they trade hands for 7 times earnings and yield 4.6% in dividends.\u00a0 Navigating the Chinese market is tricky, as some share classes are restricted to Chinese nationals.\u00a0 But even the liquid stocks available to international investors\u2014such as those that comprise FXI\u2014are incredibly cheap by world standards, trading at about 8 times earnings.<\/p>\n Could the recent surge in Chinese stock prices be yet another head fake?\u00a0 Of course.\u00a0 But the economic data suggest that the Chinese locomotive is starting to build up steam again.\u00a0 Manufacturing production just hit a 7-month high<\/a>, and new orders and new export orders are showing signs of life.\u00a0 Estimates for GDP growth are coming in at 7.7% for the year, and Western firms are showing new interest in Chinese brands.\u00a0 American private equity firm KKR just announced it would be making a $550 million investment in Chinese white goods maker Qingdao Haier.<\/p>\n As I wrote last month<\/a>, home prices in most Chinese cities continue to rise, and government corporate and personal income tax revenues have come in stronger than expected.<\/p>\n Does any of this mean that a Chinese bull market is guaranteed?<\/p>\n Of course not.\u00a0 But the conditions are certainly in place.\u00a0 Pricing is cheap and sentiment towards China is as bearish as I\u2019ve ever seen after years of stock market disappointment.\u00a0 With Chinese data rolling in better than expected\u2014and with the U.S. market starting to look a little on the expensive side\u2014I expect investors to reevaluate China in the final months of 2013.<\/p>\n The last big bull market in Chinese shares saw FXI gain more than 300% between 2005 and 2007.\u00a0 I don\u2019t necessarily expect a repeat of that performance over the next three years.\u00a0 But I do expect Chinese shares to outperform their American peers by a wide margin.<\/p>\n Sizemore Capital is long FXI.<\/p>\n Charles Lewis Sizemore, CFA, is the chief investment officer of the investment firm Sizemore Capital Management.\u00a0<\/em>Click here<\/em><\/a><\/strong>\u00a0<\/strong>to receive his\u00a0<\/em>FREE 8-part investing series that will not only show you which sectors will soar but\u00a0also which stocks will deliver the highest returns. The series starts\u00a0November 5 and\u00a0includes a FREE copy of his\u00a02014 Macro\u00a0Trend Profit Report.<\/em><\/i><\/p>\n This article first appeared on InvestorPlace<\/a>.<\/p>\n This article first appeared on Sizemore Insights as Buy China on Dips<\/a><\/p>\n![\"FXI_China\"](\"http:\/\/charlessizemore.com\/wp-content\/uploads\/2013\/10\/FXI_China.gif\")
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