Still, China increasingly is the straw that stirs the global economic drink, and it gave the glass a big twirl last November when it unveiled a two-year, $586 billion stimulus program aimed at boosting its domestic economy and avoiding a global recession.
Among other things, the plan targets low-income housing, rural infrastructure, roads, railways and airports. It also addresses health care and social welfare, and provides companies with a tax deduction for capital spending.
Economists estimate the plan could add two percentage points to China's projected GDP growth rate of 6.5% this year. That
would be in line with the government's forecast growth rate of 8%, which is still low by recent standards.
Meanwhile, China's exports were down 21% for the first four months from the same period last year. "Domestic consumption in China cannot offset the export sector weakness immediately and completely," Mobius says, "but it will have a significant impact particularly in view of the aggressive efforts by the government to boost demand."
One positive indicator, Mobius adds, is that bank lending jumped 188% for the first four months over last year's period. "This should be more than sufficient to give a major boost to domestic consumption," he says.
Through May, the Shanghai Composite had jumped roughly 45% and H shares on the Hang Seng index gained about 25%.
Gao says he sees signs of growing property transaction volume and stabilizing property prices, as well as recoveries in airline traffic and in supermarket and department store sales. His fund is overweight in sectors that play to the domestic theme-consumer discretionary, consumer staples and financials, including banks and property companies.
Among the U.S.-listed Chinese stocks Gao likes are China Life, the country's largest insurer with roughly half of the market. Another is NetEase, which makes products for China's fast-growing online gaming industry and also runs one of the country's most popular Web portals, a source of online ad revenue.
Emerging Opportunities
Among the BRICs, Riedel gives a slight nod to Brazil. Nonetheless, his top pick among emerging markets is Indonesia. Either way, he thinks indexes aren't the best way to invest in emerging markets because they tend to miss the smaller companies geared more toward the domestic opportunities in these countries.
Many observers believe emerging markets are the place to be right now, whether or not the BRICs are the best way to play them. GMO co-founder and noted market bear Jeremy Grantham recently called emerging markets "the only game in town." (That is, he cautioned, until they become the next big bubble.)
And one of the overlooked aspects in this space is fixed income. "On a longer-term basis, the return on emerging market debt is actually better than the return on emerging market equities," says Howard Booth, portfolio manager of the MainStay Global High Income fund. He adds that average annualized returns on the debt side were 9.6% from 1994 through late May 2009, versus 3.8% for equities.