Since the People’s Bank of China stunned global financial markets early last month by devaluing the yuan, the iShares China Large-Cap ETF (NYSEArca: FXI), the largest China exchange traded fund trading in the U.S., has tumbled 17%.
Even with that dramatic decline some options bears are not letting up on FXI. Despite heavy outflows and a number of bubble warnings from international observers, Goldman Sachs remains bullish on China’s outlook, pointing to the potential success of Beijing’s efforts to support the market. FXI tracks Chinese companies listed on the Hong Kong stock exchange.
“Put options on the funds’ shares outnumber call options by the biggest margin since April. Currently there are 1.3 puts open for each open call contract,” according to Reuters. “Despite a 29 percent drop over the last three months the index is still up by 29 percent for the last 52 weeks.”
Chinese stocks, the relevant U.S.-listed exchange traded funds and the yuan currency for that matter have been primary catalysts in roiling global financial markets over the past several months, but some market observers see opportunity in the world’s second-largest economy.
Given the sheer size of the economy – China is the second largest in the world, exponential growth will be harder to maintain, so investors should expect slower and mores stable growth in the years ahead.
Looking over the long-term, investors will be able to capitalize on the country’s growing middle class. Rogers pointed out that the rising income levels would help bolster domestic consumption and fuel economic growth. [China’s Economy Is Undergoing a Huge Transformation That No One’s Talking About]