The ratio spiked up during the October rally, but then fell off as Italy’s 10 year bond yields first rose above the 7% level, declining since. However, the ratio appears to be stabilizing as investors debate whether China is actually a buy at these levels.
There is little doubt that China, much like every emerging economy, has gone through its fair share of bumps and bruises along the road to development, but that does not mean the country will underperform the U.S. forever. If anything, the bearishness has been so significant in the country’s equity markets that 2012 may be the year when China’s markets substantially rally.
More so than that, given that FXI in particular has a heavy weighting towards banks which have gotten clobbered, any kind of move higher in the financials sector would directly benefit the ETF.
iShares FTSE China 25 Index Fund
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