Yes, the China focused exchange traded funds (ETFs) are way down year-to-date, but some caution to not consider them out.
So far, China’s Shanghai Composite Index has fallen 57% this year, compared to the S&P 500, which is down 15%, and the FTSE 100, down 19%. Although the Chinese markets will recover eventually, the downward movement may not quite be over, reports Billy Fisher for TheStreet.
An example is the Chinese granddaddy fund, iShares FTSE/Xinhua China 25 Index (FXI), which has traded 18.6 million shares as of last Tuesday, with average volume over the past three months at 20.3 million shares traded daily. China is just not short-term material, however, and analysts like the long-term idea of China investments. As of right now, growth rates are down and inflation is a looming threat. FXI is down 29.3% year-to-date.
Tony Sagami for Money and Markets has some thoughts about where the economy is headed, as well. Historically, markets tend to do well in an Olympics host country, going up an average of 21% in the 12 months after the games. Will China carry that torch forward?
Chinese policy makers have been trying to keep inflation and growth under control by letting its currency rise against the dollar, raising export tax refunds for garment manufacturers, increasing bank lending limits and considering an economic stimulus package.
Whichever direction China goes in the near term, wait for these funds to head back over their 200-day moving averages before considering whether it’s right for you.
The growth potential for China in the long run is apparent, but be prepared to stick out a long and volatile ride. Other ETFs to ride along with:
- PowerShares Golden Dragon Halter USX China (PGJ), down 35.2% year-to-date
- SPDR S&P China (GXC), down 33.1% year-to-date
- NETS Hang Seng China Enterprises Index Fund (SNO), down 21.3% since May 22 inception
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.