Monday, August 10, 2009

The TAO of Chinese Real Estate

Two places where investors have done extremely well since March are China and real estate. Some investors have undoubtedly been lucky enough to find themselves at the intersection of these two bullish themes by being invested in Chinese real estate.

Historically, gaining significant exposure to Chinese real estate has been at best unwieldy for U.S. investors. In December 2007, however, investors were given a shortcut to Chinese real estate with the launch of the Claymore/AlphaShares China Real Estate ETF, which seeks to match the performance of the AlphaShares China Real Estate Index and sports the slightly-too-cute ticker TAO.

For about a year and a half, TAO received very little attention and struggled to put together an occasional 100,000 share day, but as Chinese stocks rebounded, TAO started gathering a following. For the last two months, volume in TAO has been improving and this formerly niche ETF has started to attract a mainstream following.

Last week, TAO peaked at 20.39, more than 2 ½ times the March low of 8.08. As the chart below shows, since last week’s high, TAO has begun to come under some selling pressure, both on an absolute basis and relative to FXI, the popular Chinese ETF (see top study.) Going forward, TAO is an interesting way to keep an eye on speculative trends in the Chinese real estate market.

Finally, don’t be surprised if Chinese securities start to exhibit more of a bellwether role for global securities.

[Thanks to Market Rewind for bringing TAO to my attention.]

[source: StockCharts]


Anonymous said...

EJ is a RE company in China. Has more liquidity (3month avg vol of 1mm) and gained 400% since Nov2008. But it's now too late to join the party.

Bill Luby said...

Good point about EJ. I have owned that one on and off.

EJ also has options on it, unlike TAO -- and those options are very active.


CoachingByPeter said...

Many investors have strong feelings about real estate either for or against. It's better to stay only in those markets that are liquid that are easy to understand and deal with, and that offer an attractive compromise between risk and reward.

jgpietsch said...
This comment has been removed by the author.
Anonymous said...

There's also RAP, for Asian real estate in general.

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