The U.S. Federal Reserve's "E-Z Credit" policies are showing up in a place you might not expect...Hong Kong has one of the world's freest economies. And even though it's technically part of China, it has a separate currency system... with a unique link to the U.S.
You can see this policy at work in the iShares Hong Kong Fund (NYSE: EWH)... The fund is up 50% in about 18 months. And last week, it broke out to close at a five-year high...
Our colleague Steve Sjuggerud has studied how U.S. monetary policy moves the Hong Kong market. Three out of the last four times the Federal Reserve cut short-term interest rates to an extreme low relative to long-term interest rates, the gains in Hong Kong stocks were extraordinary...| Date of Signal | Gain | Months |
| 11/30/1970 | 717% | 27 |
| 9/28/1984 | 293% | 36 |
| 5/31/1991 | 221% | 31 |
| 7/31/2001 | 13% | 31 |
The latest buy signal in this system triggered in the summer of 2010. Since then, EWH is up about 32% (with a lot of volatility). That's a big gain... But judging by how well the market has done under these conditions in the past, there could be much more to come.
Many Asian countries have healthy population growth and are embracing free markets. This creates a tailwind behind the region's stock and real-estate prices.Singapore, for example, sits at the center of the booming East Asia/Australia region. It's a global financial hub and is considered one of the world's easiest places to do business. It also sports a low corporate-tax rate. All this creates a powerful tailwind for Singapore investments and prosperity.
You can see that tailwind at work in the iShares Singapore Fund (NYSE: EWS). Shares are up about 40% in the last 18 months... And they just broke out to a five-year high.
– Amber Lee Mason and Brian Hunt
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