Olympic Fever Has Not Helped China ETFs

China’s Olympics have provided an interesting distraction since they opened last week. As I mentioned when I was on Fox News this Monday, the Beijing opening ceremonies have already changed many people's image of today’s China.

Historically, the Olympics host country stock index captures a nice bounce following the event. Over the last 6 Olympiads, the average gain for host countries' stock indexes has been 19% in the 6 months following the games and 26% in the 12 months after the games.

None of that effect has been apparent in China yet, where markets continue to suffer in spite of robust economic growth. Both the Shanghai Market ETF (FXI) and the Hong Kong Market ETF (EWH) are down this week. Nevertheless, China’s announcement that their economy will grow at only 9.8% this year (down from 11.9% last year) is a far cry from negative growth here in the States.

I found General Electric’s (NYSE: GE) announcement this week - that they are selling their GE appliance division to a Chinese conglomerate - very telling. As I look across my kitchen at my GE refrigerator, I remember back to when virtually all appliances were made here in the USA. GE’s news this week is another evidence of the passing economic torch from West to East.

From an investment viewpoint, many stocks in China are getting downright cheap. Current PE ratios in our China Stock Digest portfolio are at their lowest point in three years. But, it may still be too early to get fully invested. This bear still looks like it has a ways to go.

Disclosure: none