Chamois16

US Investors Not Feeling the Chinese Stock Market Sizzle

Using YTD data for closed end funds can be quite misleading if CEF dynamics are not understood. These CEF paid out large cap gains distribution at yearend, causing the NAV to drop precipitously and putting the market prices ata momentary high premium. These conditions qickly corrected in the new yearand and market prices in January, reflecting the distribution went to more noraml discounts, Since that time, the performance ofmarket prices and NAV have more closely followed the indexes they represent.

More fundamentally, there is a major performance distinction between A&B share mainland markets and HK. CAF, as the example, marches to a different drummer than the other China CEF, even if that drummer may potentially be out of control.

As long as these PRC markets are growing rapidly, I think it is wrong to discount the utility of ETF and CEF as vehicles, CEF, for example, must recognize harvested capital gains through distribution, reducing future market risk associated with ownership.

Emerging Markets ETFs: Predictable and Consistent

Volatility, common to emerging markets, is not a reason to exclude individual securities, including ETF; longer term performance of all these funds you mention, with the possible exception of PGJ, which at best is a managed fund in drag, exceeds that of most developed markets. They had become overbought, but still represent long term value, particularly after correction

Excess volatility at the portfolio level is to be avoided since it represents risk, but a properly diversified portfolio will handle, and benefit from, emerging market stocks and index funds.

Shifting Away From the U.S. and Into Asia: An ETF Play

The chinese yuan is not pegged to the US$; it was floated commencing 21 July 2005 and has risen slowly since. The Hong Kong Dollar is more closely tied to the US dollar

The writer seems to ignore arguably the best ETF to play a rising yuan (FXI) which consists mainly of robust mainland China companies (25 in all) whose earnngs and dividends are initially denominated in renminbi, rather than HK$, thus likely to pass along to HK and US ADR holders greater benefit than HK and other Asian shares.