“Considering China’s significant contribution to the global economy, this recent stock market action is most definitely a red flag,” according to Chart of the Day.
The iShares FTSE China 25 Index Fund (NYSEArca: FXI) has posted a total return of 1.8% year to date and is lagging U.S. stocks.
“Chinese stocks have endured what amounts to an extremely wild ride since 2005. The FXI trended upward at an ever accelerating rate (i.e. parabolic) from 2005 to Q4 2007. As the credit bubble began to unravel, so too did Chinese stocks with the FXI trending downward at an ever accelerating rate from Q4 2007 to Q4 2008,” the report said.
“Beginning in Q4 2008, the FXI surged — gaining over 155% trough to peak. Since that post-financial crisis peak back in Q4 2010, Chinese stocks initially treaded water but more recently have embarked on a steep downtrend. More recently, Chinese stocks did rally but just turned back down after hitting resistance,” it added.
iShares FTSE China 25 Index Fund
