Thanks to a rally in U.S. and emerging markets stocks, the iShares China Large-Cap ETF (NYSEArca: FXI) jumped more than 3% Wednesday, touching a new 52-week along the way.
What may be more important than FXI’s Wednesday intraday action is that the largest and most heavily traded China ETF is creeping above some stiff long-term resistance, a sign that FXI’s three-month gain of 12% could be the beginning, not the end, of upside for the fund.
“The Power of the Pattern has been keeping an eye on China ETF FXI, as it approached 6-year falling resistance a couple of months ago,” said Chris Kimble of Kimble Charting Solutions. “Of late, FXI is breaking above its 6-year resistance line and acting well. Next key resistance zone for this ETF comes into play around 10% above current prices.”
A 10% move from current levels would take FXI to the $46.20 neighborhood, an area the ETF has not closed above in more than three years. Now up about 13% year-to-date, FXI is still the second-worst performer of the four major BRIC single-country ETFs, lagging the WisdomTree India Earnings Fund (NYSEArca: EPI) and the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) in significant fashion.[Bigger Doesn’t Alway Help a China ETF]
However, as FXI has recently been shedding its laggard status, investors are taking note and are allocating new capital to the ETF. Since the start of the third quarter, FXI has added $660.2 million, more than double the combined third-quarter inflows to EWZ and the Market Vectors Russia ETF (NYSEArca: RSX). [Big Cash Flows Into China ETFs]
That after FXI was one of the 10 worst ETFs in terms of 2013 outflows.