Is it Time to Enter the FXI?

Enter the Dragon - Bruce Lee

The 'long' China ETF has made a comeback since early October.  The trend could continue.

Timing is the word when it comes to trading the iShares FTSE/Xinhua China 25 Index (FXI).  The FXI is never meant to be a long term holding, then again, nothing is these days.

The FXI has increased 16.4% since Oct 4th and today it trades at around $34.55 a share.  The FXI has a 52-week range from $28.61 to $46.40.  The fund is made up of the 25 largest and most liquid Chinese companies you can trade.  China's stocks have taken a beating in 2011, the Shanghai Composite Index is down about 10% this year vs. a 1% decline for the S&P 500 (articles continues after chart).


Mastery is speculating that the worst may be over for Chinese securities thus the push for the FXI.  You could also argue that we finally just bounced and now China could tank once again.  That bearish view is supported by the latest manufacturing data coming from China, in short its not good. December was the first time in over 2 years that foreign investment fell.  Even China is feeling the pain but this is going to jab the country to get their house in order with monetary and fiscal policies. 

This is China we are talking about and they hate losing.

Which is why Mastery believes they will come back swinging and show the world they are the rightful No. 2 economic superpower and on their way to take the No. 1 spot from America.

When it comes to growth potential you can't bet against China.  The growth coming from the East may be slowing down, but its growth none the less.  China could help the world economy get back on its feet and that's likely to happen before the U.S. gets moving.  Countless companies are still pouring money into China.  Like Visa, for big corporations trying to survive, China its still everywhere you want to be.

If you think we are smoking crack you can bet against China (go short) by using the ProShares UltraShort FTSE/Xinhua China 25 (FXP).  However Mastery likes the level of support the FXI has seen above $30 since November.   The debate over where China is heading will never end, thus we conclude this argument with a clip from Enter the Dragon.