About that rally in China . . .

Part of that rally is as short term and speculative as the Japanese yen play. Chinese financial stocks -- especially securities brokerage stocks such as Citic Securities (CIIHF), which trades as 6030.HK in Hong Kong -- have soared on bets that the Beijing government was interested not only in stimulating the economy but also moving to prop up stock prices. Shares of Citic Securities were up 35.3% from Dec. 3, 2012, through Jan. 16.

But part of the rally is based on actual fundamental trends. In response to a wave of stimulus -- increased spending (again) on infrastructure projects such as rail, subway and airport projects -- economists now expect that China's economy grew at a 7.8% rate in the fourth quarter of 2012 from the fourth quarter of 2011. That would be a significant pickup from the 7.4% growth in the third quarter, because it would mark the growth rate in that quarter as the bottom of this economic cycle for China. Economists also expect to see factory output climb at a 10.2% annual rate in December and for retail sales to move up at a 15.1% annual rate. Both figures would be a slight uptick from November.

So a rally in China would likely have more staying power than a rally in Japan because the underlying fundamental trends are stronger for China. At a basic level, China's economy is growing, whereas Japan's isn't. (And the hope that Abe's stimulus plan will actually produce much growth is exactly that: a hope.)

I think investors can expect to see China's current rally go from one led by speculative financial stocks and commodity producers to one that includes domestic growth companies such as Home Inns & Hotels Management (HMIN), a member of my Jubak's Picks portfolio  and Tencent Holdings (TCEHY), which trades as  700.HK in Hong Kong.)

The Shanghai Composite Index is up "only" 16.7% from Dec. 3, 2012, to Jan. 16. Considering history, which shows a rally in Shanghai can total 30% to 40%, and considering that Shanghai stocks began December near a four-year low, that's not a huge move.

On the other hand, there are enough lingering doubts about China's ability to pull another growth rabbit out of its hat to put a limit on the rally. There's an undercurrent of worry -- about China's banking system, about the debt load at China's local governments and about China's slipping competitiveness as wages rise -- to make investors cautious. Nobody is, after all, looking for a return to the days of 9% or 10% growth in China. Economic growth for 2013 is pegged at 8.4%. And at some point at 8.4%, growth traders and investors will start to fret about valuations in China's stock markets and the limits to China's growth rate for this cycle.

Then the global hot money will start to move on.

A mishmash of markets

To me, then, 2013 looks like a year when emerging markets will outperform developed markets, but in which no one emerging-market story has tremendous staying power. China will yield its crown as the hot market of the moment to some other market after, say, six months. That won't mean that China's stocks will collapse, but they will go from being the flavor of the moment to a staid but still-nourishing meal.

How will the global pattern roll out in 2013? It's hard to tell this far in advance. India could follow China, but it has the potential for government policies that shoot its economy in the foot. Brazil will see its moment in the sun, thanks to the upcoming World Cup in 2014 and the Olympics in 2016, but the Brazilian consumer is carrying a worryingly heavy debt load.

Mexico strikes me as a good second-half play if growth picks up even modestly in the United States, its biggest export market. Turkey is an interesting second-half play, too -- if wars wind down in Syria, conflict stabilizes in Iraq, no war breaks out in Iran and the eurozone shows any sign of coming off the floor. In that scenario, an exporter like appliance maker Arcelik (ACKAY), which trades as ARCLK:TI in Istanbul, would do well (not that the stock, up 84.8% in the past 12 months, has been a laggard).

Of course, you shouldn't think just in terms of which national markets will move ahead most strongly in 2013 (and when), but also of those companies that look best-positioned to take advantage of a year that favors emerging markets. For example, Brazil's Natura Cosméticos (NUACF), which trades as NATU3.BZ in São Paulo, recently bought 65% of Australia's Aesop in a move to break out of its Latin American stronghold and build a presence in markets such as Australia, Japan and the United States. Chile's CorpBanca (BCA) has used the turmoil of the eurozone debt crisis to buy stakes outside its home market from Banco Santander (SAN) Mexico's Grupo Televisa (TV) is expanding into the United States, with our country's Spanish-speaking population on the rise.

If you can figure out which emerging markets are about to catch fire before the heat turns to ashes, more power to you. There's nothing wrong with being a momentum player in emerging markets as long as you realize you have to move early to avoid buying high and selling low. I'd say the time to increase your weighting in China is now, rather than in three or six months when the trends are clearer but the prices higher.

But you don't have to play a game of musical chairs, either. You can instead concentrate on the shares of the best companies that are growing from being dominant players in their local markets to being regional or global brands. That's a way to play a steady, long-term trend, that of the relative rise of the world's developing economies. Much of the next generation of global brands -- the next Coca-Cola (KO) or McDonald's (MCD) -- will be from the world's developing economies. Picking up a few of these during the volatility that I think is likely to characterize 2013 is a way to profit from that volatility without getting completely caught up in the short term.

Updates to Jubak's Picks

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At the time of publication, Jim Jubak did not own or control shares of any company mentioned in this column in his personal portfolio. The mutual fund he manages, Jubak Global Equity Fund(JUBAX), may or may not now own positions in any stock mentioned in this column. The fund did own shares of Arcelik, CorpBanca, Grupo Televisa, Home Inns & Hotels Management, Natura Cosméticos and Tencent Holdings as of the end of September. Find a full list of the stocks in the fund as of the end of September here.

Jim Jubak's column has run on MSN Money since 1997. He is the author of the book "The Jubak Picks," based on his market-beating Jubak's Picks portfolio; the writer of the Jubak's Picks blog; and the senior markets editor at MoneyShow.com. Get a free 60-day trial subscription to JAM, his premium investment letter, by using this code: MSN60 when you register at the Jubak Asset Management website.

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