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By John Spence & Tom Lydon

The iShares FTSE China 25 (NYSEARCA:FXI) is down 12% from its 2013 high even as the Dow Jones Industrial Average sets new records, illustrating the divergence between emerging and developed markets do far this year.

Now, JP Morgan (NYSE:JPM) has downgraded China to underweight and recommended bearish bets against the country's largest banks.

"Growth momentum is now slowing with policy response constrained; a nasty combination," Adrian Mowat, JP Morgan's chief Asia and emerging-market strategist, wrote in a note Monday, Bloomberg News reports.

FXI, the Chinese ETF, has dropped below its 200-day exponential moving average.

Earlier this month, the government unveiled new measures designed to cool property prices.

Guggenheim China Real Estate (NYSEARCA:TAO) is off about 13% from its 52-week high recorded in January.

"Investors are concerned about the possibility of slowing growth and monetary tightening," Wu Kan, a fund manager at Dazhong Insurance Co., told Bloomberg.

iShares China FTSE China 25

(click to enlarge)

Source: China Downgraded By JP Morgan After ETF Falls 12%