China - Main index touching 8 year lows, is this the moment to enter?
- Thread starter CN2000
- Start date
Chinese ETF market has been interesting since that last post I made of 7-13-05.
Current closing prices as of Friday 5/19/06: FXI USD 78.15 and PGJ USD 16.94. Year period highs for FXI: USD 83.90 and PGJ USD 18.07.
When compared to closing prices of 7-13-05, FXI is up 35.4%, and PGJ up 24.4%. FXI also gives an annualized dividend yield of 1.6% and PGJ an annualized dividend yield of 0.5%. ]All this is within the context of the largely cosmetic movements in the value of the Chinese currency which has barely revalued in the interim (3.24% since 5/19/03).
SSE composite has gone parabolic recently with annualized return in the 45-50% range.
There is really very little question in my mind that the developed world (G7, IMF, and most of all the US) is very unhappy with the Chinese failure to revalue the renminbi as they had suggested (after the cosmetic 2% revaluation last year) with Chinese GDP growth at 9-10% annually; the recent frosty US-China meetings between Bush and Hu included. There is no doubt that the US views China not only as a trading partner and competitor, but as the next potential superpower/enemy. The rest of the world knows this as well. Recent market action following the G7 meeting resulted in a continuation of dollar weakening through some important technical levels versus the EUR and JPY (confirmation of the reverse head and shoulders through the neckline on weekly EUR/USD and exiting the symmetric triangle on the downside in USD/JPY). This was associated with a rather impressive bull run in commodities extending, which some were whispering was the Chinese (i.e. weâll convert our dollar assets into hards if you try to devalue your dollar since we wonât devalue our renminbi). The correction over the last two weeks was equally impressive, and you have to wonder what the cause of it was initially, although later waves were due to stop loss and panic selling. The US equity market selling then spread to Europe, and ultimately to the emerging markets, which have sold off strongly in an equity contagion. SSE has remained bid, but that market is not as easily enterable/tradable as others.
Chart-wise, FXI has been in a channel uptrend since November 2005, with a recent false breakout and subsequent re-entry into the channel with testing of an inside trendline at 76.15 and support at 72.50-74.0 from the lower channel line. Under 74.0, there is not really much support until the 55-60 range presently. There is a broadening formation suggested at present with lower range of 75.20 and upper range somewhere toward 86.
So, if we avoid a global equity market meltdown (a âUS contagionâ), and China decides to play reasonably by global rules (avoiding tariffs and other 1st world interventions), you might want to either try to buy at current levels and stop out below 72-74 depending on your risk tolerance, or wait for an uptrend breakout above 82-82.50 for a momentum play. FXI is believed to allow for participation in currency revaluation, although after the initial revaluation, Iâm not entirely sure what would happen to the index.
Disclosure: I currently hold no shares of FXI, but have in the past. This post is for entertainment only â if you are seeking investment advice, you are directed to consult an appropriate financial, legal, or tax advisor about your particular situation. DYODD.
Current closing prices as of Friday 5/19/06: FXI USD 78.15 and PGJ USD 16.94. Year period highs for FXI: USD 83.90 and PGJ USD 18.07.
When compared to closing prices of 7-13-05, FXI is up 35.4%, and PGJ up 24.4%. FXI also gives an annualized dividend yield of 1.6% and PGJ an annualized dividend yield of 0.5%. ]All this is within the context of the largely cosmetic movements in the value of the Chinese currency which has barely revalued in the interim (3.24% since 5/19/03).
SSE composite has gone parabolic recently with annualized return in the 45-50% range.
There is really very little question in my mind that the developed world (G7, IMF, and most of all the US) is very unhappy with the Chinese failure to revalue the renminbi as they had suggested (after the cosmetic 2% revaluation last year) with Chinese GDP growth at 9-10% annually; the recent frosty US-China meetings between Bush and Hu included. There is no doubt that the US views China not only as a trading partner and competitor, but as the next potential superpower/enemy. The rest of the world knows this as well. Recent market action following the G7 meeting resulted in a continuation of dollar weakening through some important technical levels versus the EUR and JPY (confirmation of the reverse head and shoulders through the neckline on weekly EUR/USD and exiting the symmetric triangle on the downside in USD/JPY). This was associated with a rather impressive bull run in commodities extending, which some were whispering was the Chinese (i.e. weâll convert our dollar assets into hards if you try to devalue your dollar since we wonât devalue our renminbi). The correction over the last two weeks was equally impressive, and you have to wonder what the cause of it was initially, although later waves were due to stop loss and panic selling. The US equity market selling then spread to Europe, and ultimately to the emerging markets, which have sold off strongly in an equity contagion. SSE has remained bid, but that market is not as easily enterable/tradable as others.
Chart-wise, FXI has been in a channel uptrend since November 2005, with a recent false breakout and subsequent re-entry into the channel with testing of an inside trendline at 76.15 and support at 72.50-74.0 from the lower channel line. Under 74.0, there is not really much support until the 55-60 range presently. There is a broadening formation suggested at present with lower range of 75.20 and upper range somewhere toward 86.
So, if we avoid a global equity market meltdown (a âUS contagionâ), and China decides to play reasonably by global rules (avoiding tariffs and other 1st world interventions), you might want to either try to buy at current levels and stop out below 72-74 depending on your risk tolerance, or wait for an uptrend breakout above 82-82.50 for a momentum play. FXI is believed to allow for participation in currency revaluation, although after the initial revaluation, Iâm not entirely sure what would happen to the index.
Disclosure: I currently hold no shares of FXI, but have in the past. This post is for entertainment only â if you are seeking investment advice, you are directed to consult an appropriate financial, legal, or tax advisor about your particular situation. DYODD.
china NPFs stand anywhere between $350bio (official) - $550bio (independent conservative) - $900bio (may 2006 E&Y report, withdrawn within days for arguable-to-death reasons but in any case a number considered sensible by involved parties, even the ones who go by $550 so as not to annoy china in a detrimental way to doing biz...)... thats more or less the size of china's reserves...
http://www.elitetrader.com/vb/showthread.php?s=&threadid=69236
funnily every man and his dog is made to think that china might revalue the yuan in the near future... that thats the only way forward...
reality is... well you'll sound find out, when the NPL bubble eventually bursts
))
http://www.elitetrader.com/vb/showthread.php?s=&threadid=69236
funnily every man and his dog is made to think that china might revalue the yuan in the near future... that thats the only way forward...
reality is... well you'll sound find out, when the NPL bubble eventually bursts
))
Interesting article on Chinese entrepreneurship fyr..
http://www.smh.com.au/news/business/chinas-rising-entrepreneurs/2006/05/26/1148524888951.html
http://www.smh.com.au/news/business/chinas-rising-entrepreneurs/2006/05/26/1148524888951.html
Ouch.
China down 5% yesterday.
FXI responding in kind today - down 5.5% at present. Coming into some pretty thin air on the support side... Major support doesn't seem to exist anywhere until 58-60ish.
There may be a downtrend support channel starting to form around here but I think its far too early to tell.
Combined with india's meltdown, its pretty clear this leg of the emerging market run up is over.
PGJ looks equally dismal, and is within a dollar of giving up all positive gains and going negative for the year. FXI seems to have weathered better, and still seems to be the 'better' ETF.
I'm not sure what difference the NPL's make vs. the american trade deficit or the US national debt. Foreign capital inflows may distribute the losses of the NPL's and make a big problem a little problem. Viz a Viz the recent inroads citicorp making into china and the BOC float.
just for entertainment purposes, folks.
China down 5% yesterday.
FXI responding in kind today - down 5.5% at present. Coming into some pretty thin air on the support side... Major support doesn't seem to exist anywhere until 58-60ish.
There may be a downtrend support channel starting to form around here but I think its far too early to tell.
Combined with india's meltdown, its pretty clear this leg of the emerging market run up is over.
PGJ looks equally dismal, and is within a dollar of giving up all positive gains and going negative for the year. FXI seems to have weathered better, and still seems to be the 'better' ETF.
I'm not sure what difference the NPL's make vs. the american trade deficit or the US national debt. Foreign capital inflows may distribute the losses of the NPL's and make a big problem a little problem. Viz a Viz the recent inroads citicorp making into china and the BOC float.
just for entertainment purposes, folks.
apples to oranges... unless you want to believe that china's economy / economic reporting is as transparent, reliable and resilient as the US's, in which case i wish u well... also, the US trade deficit is only a concern to newspeople and their audience (a good barometer of how much of a real concern it is is the MoM net foreign securities purchases NFSP for instance)... unlike the US budget deficit outlook and the US net international investment position (NIIP)...
anyway if you've never seen a credit bubble pop in an emerging-type economy (however big), just sit & watch, am sure you'll enjoy the show
))