Is the China ETF Poised for a Big Move?

At least one options investor is betting that a China-focused ETF will either surge or fall off sharply within the next four weeks.

A large straddle appeared to have been bought on the iShares FTSE/Xinhua China 25 Index (FXI), according to one analyst. Doris Frankel for Reuters explains that such a strategy is designed to benefit from any boost in volatility. To be profitable, the ETF’s shares would need to rise as high as $30.60 or fall to $21.40.

The combo strategy is catching the attention of many investors who are wondering where the trade came from, which was a marked size. An option is sold by one party to another which gives the buyer the right to buy (call) or sell (put) a stock at an agreed-upon price, within the certain period or on a certain date. Options in America can be used anytime between the date of purchase and the expiration date.

• iShares FTSE/Xinhua China 25 Index (FXI) is down 10% over past three months

Meanwhile, China has surpassed Germany as the world’s third-largest economy, demonstrating how the global economy has shifted.

In 2007, China’s GDP surpassed Germany’s, with China at 11.9%, and then revised recently again at 13%. China came in at $3.38 trillion, and Germany lagged behind at $3.32 trillion in 2007, reports Ariana Eunjung Cha for The Washington Post.

Du Guodong for China View reports that China’s GDP is going to drop 8.4% this year, from 2008’s 9.1%, but the country will not loose its position as the Eastern region’s hub of growth. The worst case scenario is GDP at 7%. The 2009 target rate is set at 8%.

China has a set of aggressive economic measures in store for the second half of 2009

Comments

[ArtfulDodger]

I don't know about the ETFs, but if you're an investor, you better make a good bet on China, because these people are determined to make a huge splash on the capitalist world.

I say they're going to do it.

I love these companies: Netease (NTSE); Huaneng Power (HNP); Yanshou Coal (YZC); China Mobile (CHL); Cnooc (CEO).

Check their earnings, their margins, and their balances sheets and compare them with similar US companies.

Be sure to add in that China is just about where the US was (businesswise) in the 19th Century when the nation had no income tax, no regulations, and the people were a lot less envious of those who made money than they are today.

Such an atmosphere is a powerful catalyst for wealth growth.

2009 Jan 21 08:46 AM

[Conan the Barbarian]

China did its best to slow its economy. It succeeded in spades. Its expansion was primarily in the Industrial areas.

It has a very big problem, excess industrial capacity.

I believe that China will weather this better than the rest of the Industrialized nations because of its Reserve situation but I also believe that its very size will impede its ability to accelerate its internal growth to compensate for the reduction in demand for its goods worldwide.

They report GDP for the 4th quarter soon, +6.8% is expected.

2009 Jan 21 09:47 AM

[Chris H.]

Does anyone know much about this Hong Kong index fund HKG? It seems like you could get more diversification out of this than just the 25 largest Chinese companies. But I haven't researched it much yet.

2009 Jan 21 09:47 AM

[fran]

HKG--began 4/08, tracks Hong Kong index, NYSE listed. what is your objective? define this, then look at options--SA has good library of ETF.


On Jan 21 09:47 AM Chris H. wrote:

> Does anyone know much about this Hong Kong index fund HKG? It seems
> like you could get more diversification out of this than just the
> 25 largest Chinese companies. But I haven't researched it much yet.

2009 Jan 21 12:41 PM

[huangthomas]

FXI is an index composed of large Chinese enterprises listed in Hong Kong stock exchange. Some of them are also components of Hong Kong exchange's HangSeng index. Native Hong Kong industries are preeminently financials and real estate. If financial and real estate sounds attractive to you, go ahead and look into it.

2009 Jan 21 03:29 PM

[Conan the Barbarian]

Chinese GDP came in exactly as predicted: 6.8%.

Their economy lost 4 million jobs last year and is expected to lose another 5 million this year.

I do not know how they expect GDP of 8% with the accelerating job losses.

Obama's actions today certainly got my attention but I did not know that Government personnel were making $100K in the first place.

2009 Jan 22 02:04 AM