As the Chinese economy (
) continues to show signs of a resurgence in growth, investors are
beginning to turn their attention back to the world's second
[caption id="attachment_74207" align="alignright" width="300"
caption="Nanjing Road Pedestrian Mall at People's Sqaure,
Although the Shanghai Composite
dropped a little more than a percent in Thursday
, this is little reason to fret. Given that the Shanghai Composite
has rallied more than 15% since its lows a little over a month ago,
the exchange has been due for a bit of a breather.
Today's drop was largely the result of profit taking, especially
in the financial sector. In light of the heavy weighting of FXI in
financials, traders should not be surprised to see the ETF lag in
New York trading on Thursday.
In addition to profit taking, the Chinese real estate sector
underperformed as a result of rumors pertaining to new real estate
tax mechanisms. Outside of a few major cities, few Chinese citizens
pay taxes on their real estate holdings; an increase in taxation
could adversely affect the country's major developers like Sun Hung
Kai Properties (
) going forward.
However, such a move by Beijing wouldn't necessarily harm
overall market performance if additional taxes drive more retail
investors into equities instead of property.
On the whole, the Chinese economy remains attractive to Western
investors. As economists continue to ratchet up growth forecasts,
equities with exposure to China are likely to perform well, in
particular those that have faltered over the past few months as
doom and gloom for the Chinese economy was the repeated
While Chinese tech stocks like Baidu (
) Qihoo 360 (
) and casino stocks like Las Vegas Sands (
) and Melco Crown Entertainment (
) have all run up over the past month, if
more positive news pertaining to the Chinese economy
continues to materialize this week, these stocks could run
Author and family are net long BIDU, LVS, and MPEL.