Signs China ETF Slowdown May Not Let Up Soon | ETF Trends

While pundits are citing the improving shipping stats and repressed consumer demands, China, along with its exchange traded funds (ETFs), may still be suffering from waning exports and investments.

Even if China maintains a 8% growth rate for 2009, there are signs of a drastic slowdown in the economy, remarks Carl Delfeld for Forbes Magazine. The IMF predicts Asia will grow only 2.7% this year, a significant drop from previously announced 4.9%.

  • Electricity usage is a good indicator of industrial health, but it was down 8% in December from a year ago across China and in Guangdong, which makes up 30% of China’s exports. It is noted that production in the manufacturing sector declined for the sixth consecutive month in January.
  • China’s top two export markets, the EU and America, along with intra-Asian trade are also abating. China’s import levels are also falling and Japanese exports to China fell 45% in January.
  • Foreign expatriates that worked in China are now leaving for home and more than 20 million rural migrant workers in China have returned home after losing their jobs in the ongoing economic downturn.
  • Forecasts for foreign direct investment in the emerging markets is likely to be around $165 billion in 2009 compared to $466 billion in 2008. China’s foreign-exchange-reserve accumulations plummeted 74% in the last year as investment flows dried up.
  • iShares FTSE/Xinhua China 25 Index (FXI): is down 7.9% in the last three months; It is noted that the ETF may be at 10 times suspect earnings.

ETF FXI performance

  • Pessimistic investors may trade on the misfortunes of FXI with the UltraShort FTSE/Xinhua China 25 ProShare (FXP), which moves 200% in the opposite direction, is down 17.5% in the last three months.

ETF FXP performance

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.