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.
Often criticized for its large weight to the financial services sector, which currently rests at 53.6%, that hefty exposure has worked in FXI’s favor this year as Chinese banks have rallied. Dividend growth by banks there has made China the largest dividend payer in the developing world.
FXI’s roster of 26 stocks will grow to 50 next month when the ETF transition to the FTSE China 50 Index at the close of U.S. markets on Sept. 19.
iShares China Large-Cap ETF
Chart Courtesy: Kimble Charting Solutions
ETF Trends editorial team contributed to this post.