U.S. and China: Comparing the G2

The United States and China are referred to now as the G2, whose twists and turns dominate world economic dialogue, and perhaps outcomes. They are a study in contrasts economically, politically, demographically, socially, in terms of national balance sheet, GDP growth, government roles in business, and more. A side-by-side comparison of the charts for two proxy funds (SPY and FXI) is also a study in contrasts.

The charts below show the OHLC prices and two simple moving averages (middle panel), a percentage return comparison between the fund and the the US aggregate bond index (upper panel), and the share volume traded (lower panel).

click images to enlarge

1-Year Daily with 200-day and 100-day averages

3-Years Weekly with 40-week and 20-week averages

5-Years Monthly with 5-month and 10-month averages

China is more interesting as an equity investment for now.

There are concerns in the US that the rally may have gone too far too fast without adequate fundamental support (and may have already exhausted itself).

There are concerns in some quarters that China’s stock market may be even more ahead of itself, because of government stimulated production that is not matched by export growth, and perhaps not by internal consumption.

Both country funds are showing discomforting divergences with prices rising and volumes falling over recent weeks. However, China has exhibited important trend oriented moving average cross-overs which may indicate a continuing ownership opportunity, tempered by the short-term risk that a retracement in the US stock market would drag most other country stock indexes down with it.

Comments

[User 143167:]

M2 growth in China is 25.7% YoY, while 9% YoY in the USA. I just think those policy makers in G2 are actually on the same boat. The only difference is that China's banking sector and household have no problems to leverage up so far, while the maxed-out Americans have to deleverage for a while so as to netrualize the Fed's money pumping effects.

Jun 20 10:02 PM