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Saturday, February 16, 2008 6:52:21 PM
China ETFs Stumble; Is The Bull Run Over?
Last week, iShares FTSE/Xinhua China 25 Index Fund (NYSEArca:FXI.TO - News) was 35% off its high.
The ETF tracks the performance of the largest Hong Kong-listed companies that do most of their business in the People's Republic of China. It hit its all-time high of $219.56 Oct. 31.
The reason for the pullback is twofold: snow and the U.S. economy. Chinese industry came to a near standstill last month after being hit by the most severe snowstorms in 50 years. Factories closed, transportation came to a standstill and power was cut off for days.
Millions of crops were lost, and hundreds of thousands of homes were flattened by ice and snow.
Fewer U.S. Orders
The U.S. economic slowdown has meant fewer U.S. orders for goods and a slowing of production. The two factors combined to help push the Shanghai Composite Index down 9.3% on Feb. 1. That's the index's sharpest one-week loss since 1997.
The fund's biggest holdings really suffered. China Mobile (NYSE:CHL - News), the world's largest mobile phone operator, is the fund's most heavily weighted stock. China Life Insurance (NYSE:LFC - News) and PetroChina (NYSE:PTR - News) are also among the fund's top holdings. All slid more than 4% last week.
Business also halted last week because of the Lunar New Year, when just about everything in Asia shuts down.
Some believe China's run is over and point 15 the fact that a short China fund and levered short China funds were launched last week.
Inaccurate Picture
Some analysts say don't give up on China yet.
Launching short funds when everything's closed by storms and the Lunar New Year doesn't give an accurate picture of performance. Those same companies that showed poorly for Xinhua last week are in recovery this week.
Despite the recent problems, China still shows growth potential. Its Q4 2007 GDP climbed 11.2% from the previous year. The country's National Statistics Bureau says tax revenues hit $691 billion last year and its foreign reserves are $1.53 trillion.
Other Chinese ETFs also are bouncing. For example, PowerShares Golden Dragon Halter USX China (AMEX:PGJ - News) perked up this week, rising 11%.
The Golden Dragon fund tracks U.S.-listed stocks of companies that get most of their revenue from China and have market caps as low as $500 million.
That U.S. listing can make a difference to investors when a sometimes-corrupt government grabs a big stake in major companies.
http://biz.yahoo.com/ibd/080214/etf.html?.v=1
Last week, iShares FTSE/Xinhua China 25 Index Fund (NYSEArca:FXI.TO - News) was 35% off its high.
The ETF tracks the performance of the largest Hong Kong-listed companies that do most of their business in the People's Republic of China. It hit its all-time high of $219.56 Oct. 31.
The reason for the pullback is twofold: snow and the U.S. economy. Chinese industry came to a near standstill last month after being hit by the most severe snowstorms in 50 years. Factories closed, transportation came to a standstill and power was cut off for days.
Millions of crops were lost, and hundreds of thousands of homes were flattened by ice and snow.
Fewer U.S. Orders
The U.S. economic slowdown has meant fewer U.S. orders for goods and a slowing of production. The two factors combined to help push the Shanghai Composite Index down 9.3% on Feb. 1. That's the index's sharpest one-week loss since 1997.
The fund's biggest holdings really suffered. China Mobile (NYSE:CHL - News), the world's largest mobile phone operator, is the fund's most heavily weighted stock. China Life Insurance (NYSE:LFC - News) and PetroChina (NYSE:PTR - News) are also among the fund's top holdings. All slid more than 4% last week.
Business also halted last week because of the Lunar New Year, when just about everything in Asia shuts down.
Some believe China's run is over and point 15 the fact that a short China fund and levered short China funds were launched last week.
Inaccurate Picture
Some analysts say don't give up on China yet.
Launching short funds when everything's closed by storms and the Lunar New Year doesn't give an accurate picture of performance. Those same companies that showed poorly for Xinhua last week are in recovery this week.
Despite the recent problems, China still shows growth potential. Its Q4 2007 GDP climbed 11.2% from the previous year. The country's National Statistics Bureau says tax revenues hit $691 billion last year and its foreign reserves are $1.53 trillion.
Other Chinese ETFs also are bouncing. For example, PowerShares Golden Dragon Halter USX China (AMEX:PGJ - News) perked up this week, rising 11%.
The Golden Dragon fund tracks U.S.-listed stocks of companies that get most of their revenue from China and have market caps as low as $500 million.
That U.S. listing can make a difference to investors when a sometimes-corrupt government grabs a big stake in major companies.
http://biz.yahoo.com/ibd/080214/etf.html?.v=1
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