Thursday, November 4, 2010

Chinese Stocks Thump U.S. Counterparts

With all the discussion of quantitative easing and elections, it is all too easy to adopt (or continue to cling to) an Americentric view of the investment world.

The truth is, however, that the bulls have been doing much more damage in China as of late than in the United States.

The chart below shows the performance of FXI, the iShares FTSE/Xinhua China 25 Index, for 2010. Note that while much hoopla has been generated over the new 2010 highs in the S&P this week, FXI has repeatedly been making new highs for the year since the beginning of October and is now approximately 10% above previous highs.

Note also that in terms of relative performance (top study), FXI has been outperforming the S&P 500 index consistently going all the way back to the May 6th flash crash.

I have previously talked about thinking of China as a possible leading indicator for U.S. stocks. Recent data suggests that investors may want to give additional thought about the predictive power of Chinese stocks and reorient some of their geographic bias.

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Disclosure(s): Long FXI at time of writing


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