Time to Pull the Trigger on China – Analyst (FXI) (FCX)

July 30, 2012 2:03 PM EDT
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With a handful of sources recently suggesting the government in China is planning stimulus efforts in construction and infrastructure, MKM Partners' Chief Economist, Michael Darda, stuck his neck out in a note late last week. Following up Darda's call this week is Jim Strugger, a derivatives strategist at MKM, who is recommending two trades with directional exposure to a rebound in China.

Darda's note said the Chinese economy might be at a potential positive inflection point that could provide a floor under both equities and commodities. He noted the nation's efforts in these areas are a reversal of course for policy makers who have been fighting to cool inflation in the country. With inflation now in check, the government in China is launching efforts to reboot the slowing economy.

Tacking onto that idea, Strugger is suggesting the outright purchase of iShares FTSE China 25 Index Fund (NYSE: FXI) November 36 strike calls and Freeport-McMoRan (NYSE: FCX) November 35/40 call spreads.

While the iShares FTSE China 25 Index Fund (NYSE: FXI) is lower by 5.36 percent on a year-to-date basis, shares of Freeport are down about 8 percent.

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