China's stock market tumbled to three-month lows this week on
worries the government will do more to control property price
increases and economic data showed economic recovery in the
world's second-largest country losing steam.
Trading in the U.S.
, iShares FTSE China 25Index Fund (
) has dropped 3% so far this week while its benchmark, the
iSharesMSCI Emerging Markets Index (
), has slipped 2%.IShares MSCI EAFE Index (
), tracking developed foreign markets, was up 0.3%.
FXI is down 7% year to date and down 2% from a year ago. EEM
is down 3% year to date and 1% in the past year.
High inflation for February on top of weak retail sales and
industrial production data released earlier this week is being
blamed for scaring away investors. China's consumer price index
hit a 10-month high of 3.2% year over year in February. China has
set its inflation target at 3.5%.
Retail sales climbed 12.3% in the January-to-February period
over the year-ago period, undercutting expectations of a 15%
increase and below its historical average of 15.8% since 2010,
according to TradingEconomics.com. Industrial output rose 9.9% in
the January-February period year over year, missing expectations
of 10.6%. Industrial output on average surged 13.3% a year from
1990 to 2013, according to Trading Economics.
Whether China can maintain its rapid growth rate is being
questioned as the country changes leadership and manufacturers
increasingly send work to other countries, says Jim Lowell, chief
investment officer at Adviser Investments in Newton, Mass., and
chief editor of "Forbes ETF Advisor."
But the Chinese government, in efforts to support economic
growth in 2013, is taking measures to stimulate consumer demand,
which should benefit corporate sales and earnings.
Chinese stocks have fallen so much, they could be seen as a
value play. FXI currently trades at nearly 9 times forward
earnings vs. 12 for emerging markets. That's while sporting
historical earnings growth of 17% vs. 11% for emerging
IShares FTSE China 25, the largest ETF tracking the People's
Republic, has fallen 10% from its 52-week high, which is
considered a normal correction in an uptrend. It fell below its
50-day moving average five weeks ago, which is bearish. But it's
still trading above its longer-term 200-day moving average,
indicating a weak uptrend. Its chart currently features a very
weak Relative Strength Rating of 34 on a scale of 1 to 99,
indicating that it has lagged two-thirds of the market the past
12 months. Its IBD Accumulation/Distribution Rating of E is the
lowest possible on an A-to-E scale, showing that institutions are
fleeing.Guggenheim China Small Cap (
) andGuggenheim China Real Estate (
) have similar chart patterns and IBD Ratings as FXI.
areSPDR S&P China (GXC) and iSharesMSCI China Index Fund
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