by Chris Johnson, SmartStops.net contributing writer
It looks as if China is starting to reignite growth, as we’ve seen Chinese consumer price index (CPI) and the April trade surplus come in above market expectations, as the country tries to balance keeping up strong economic growth, with keeping inflation in check. It’s been a tough balancing act, but from abroad, it looks as if China has gotten it right, and initiated a soft landing. The soft landing has not helped the stock market, but it looks like China is starting to focus a little more on growth now, and if that’s the case, then there are a few ETFs to consider to play this trade.
One ETF to consider is Morgan Stanley China A Share Fund, Inc. (CAF), which tracks the Shanghai Composite A shares in China. It’s a thinly traded ETF, and has just under $500 million in assets under management. Brian Kelly, of CNBC’s Fast Money, has been positive on the name, and has recently said that he is buying shares in anticipation of such a move in China.
The other ETF to consider trading is iShares FTSE China 25 Index Fund (FXI). From Yahoo Finance, the fund is described as: “The investment seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE China 25 Index.” It has a 0.72% expense ratio, compared to a 0.74% expense ratio for others in its category.
Trend Analysis: Both CAF and FXI have been in an uptrend since last week, and are up 5%, and 3% respectively for the year. If China continues to reignite growth, this could change significantly.
Risk Analysis: If you like China at these levels, be sure to first determine your risk and protective exit strategy. As SmartStops.net shows, for FXI, potential problems could arise if it should break the current price point of $43.26, and CAF crosses below $27.66. Remember to always know your exit strategy!
Despite a series of tightening monetary measures in 2010, China’s economy grew by an astonishing 9.8 percent in the fourth quarter pushing it ahead of Japan as the world’s second largest economy, while fueling concerns that more needs to be done to fight inflation.
According to Aaron Back and Jason Dean at the Wall Street Journal, China’s economy grew at an annual pace of 10.3 percent in 2010, crushing its 9.2 percent growth in the prior year. Furthermore, China reported a 31 percent increase in exports and a 38 percent increase in imports as the Chinese economy demanded more raw materials, machinery and consumer goods from producers around the world. Read More…
In an attempt to ease concerns and fears that rising inflation could damper economic growth, China raised bank reserve requirements for the third time in the last five weeks, influencing the Global X Financials ETF (CHIX), the iShares FTSE/Xinhua China 25 Index Fund (FXI), the SPDR S&P China ETF (GXC) and the Guggenheim China All-Cap ETF (YAO).
The Chinese Central Bank raised the reserve requirement ratio by 50 basis points after earlier data showed a rise in property prices for a third straight month, an increase in both exports and imports, significant increases in M2 money supply and jumps in new lending by financial institutions despite government efforts to stem the flood of liquidity into the nation’s economy. Read More…
As inflationary concerns continue to loom in China, the nation’s government is making moves to curb to fight this rise in prices, which could potentially influence the iShares FTSE/Xinhua China 25 Index Fund (FXI), the Global X China Financials ETF (CHIX), the SPDR S&P China ETF (GXC) and the Claymore/AlphaShares China All-Cap ETF (YAO).
In the month of October, the consumer price index in the world’s second largest economy rose to 4.4 percent year over year driven primarily by a 10.1 percent rise in food prices. This increase in prices has resulted from an influx of money supply in the Chinese economy due to the nation’s expansionary monetary policies which enabled its banks to increase lending. Read More…
By Kevin Grewal
2009 was a great year for Brazil, Russia, India and China, better known as the BRIC nations, as equities that track these regions of the world performed remarkably and their future remains bright.
For one reason, BRIC nations are where economic growth is expected to be. According to the International Monetary Fund (IMF), all four of the BRIC nations are expected to show GDP growth in 2010, with China leading the way at 8.5%, followed by India at 6.5%, then Brazil at 2.5% and Russia at 1.6%. Read More…