Saturday, October 12, 2013

A study on Chinese ETF's

Since I bought HAO about 4 weeks ago, it was doing well as US market had some turbulence because American politicians played their threatening games for government closure and national debt ceiling. But I need to clarify my long term exit criteria for HAO. As part of my study for Chinese stock market conditions, I found the following interesting ETF's that are helpful to determine the health of China's economic status as reflected by Wall street.

Besides the Chinese big caps in FXI, we have the small cap HAO and Chinese technology CQQQ representing broad Chinese market. The Chinese bull market is led by the technology ETF CQQQ as it has rose over 50% year today. The Chinese real estate ETF TAO is lagging SPX but outperformed US real estate IYR (TAO provides no dividend) at this time. The thinly-traded China Energy ETF CHIE also showed an uptrend in the last 3 month.

The Chinese bond ETF DSUM has outperformed US bond ETF BOND manged by the bond king Bill Gross in the last 6 month. The Chinese Yuan ETF CYB outperform US dollar UUP and bond BOND in the same period. I think the Yuan price indicates longer term economic trends in China than the stock market prices.

If the Chinese economy is to collapse, I would expect the Chinese stock market ETF FXI, and bond market DSUM and the Yuan CYB to fall at the same time. If they don't drop at the same time, it's telling me that the Chinese economic may be healthy overall in the long run.

Additionally, Chinese economy has strong impact on commodities DBC and their producing countries like Australia EWA and its currency FXA. These ETF's are likely to lag the Chinese counterparts in time and to perform well later if Chinese ETF's gets real hot.

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