Dow Theory: China favorites

"It’s hard not to be intrigued by the investment potential of China," says Richard Moroney. In Dow Theory Forecast, he highlights a trio of funds and a China infrastructure stock.

"China is soon expected to overtake Japan as the world’s second-largest economy and Germany as the leading exporter.

"Aided by aggressive ?scal-stimulus efforts, rebounding consumer demand has sparked increased spending among China’s 1.3 trillion citizens, who represent nearly one-?fth of the world’s population.

"China says its gross domestic product grew 8.9% year-to-year in the September quarter, after a 7.9% increase in the June quarter.

"Full-year growth should approach 8%, down from 10.6% in 2008 but very healthy relative to the U.S. Increasingly, investors looking to capitalize on China’s growth can do so via U.S.-traded individual stocks.

"Chinese equities, like those from other emerging markets, tend to be much riskier than U.S. stocks. For most investors seeking broad exposure to China, a mutual fund is the best choice.

"Among no-load funds focused on China -- Fidelity China Region (FHKCX), Guinness Atkinson China & Hong Kong (ICHKX), and Matthews China (MCHFX) score well in our fund-ranking system. 

"Still, adventurous stock investors looking for ideas might want to consider individual issues. One intriguing stock is Jinpan International (NYSE: JST).

"A leading maker of transformers used for power distribution and wind-energy products, Jinpan is bene?ting from an infrastructure build-out and increased demand for electricity.

"Its products are used in large projects such as real-estate developments, factories, airports, and subways.

"Management is focused on bolstering pro?t margins while expanding product lines and the customer base. The stock, with an impressive Overall score of 99 (out of 100), has a market value of only $237 million."