China Downgraded By JP Morgan After ETF Falls 12%

Includes: FXI, TAO
by: Tom Lydon

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

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.