iShares China ETF (FXI) Feeling The Heat From Currency Turmoil

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September 25, 2017 11:25am NYSE:FXI

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China imposed sanctions on North Korea over the weekend, and it is hard to ignore the recent volatility that the country’s currency, the Yuan, has experienced lately.


The currency peaked before mid-September, but it has quickly given back some gains against other world currencies and some market participants are pointing to the anticipated October Communist Party Congress meeting. A Bloomberg.com article titled “China’s Yuan Is Anything But Stable As Party Congress Approaches,” notes the following:

“The turning point for the currency came when the People’s Bank of China eased a forwards trading rule that made betting against the currency more expensive – a clear signal that the surge had gone far enough. A mild recovery in the greenback thanks to a more hawkish Federal Reserve – The Bloomberg Dollar Spot Index is up 1.3 percent since September 8 – has hastened the yuan’s decline.”

Today we are seeing additional weakness in the Yuan after a pop late last week and Chinese stocks are taking the brunt of the punishment, with benchmark ETF FXI (iShares China Large-Cap, Expense Ratio 0.74%) cratering more than 2% today and threatening to violate its 50 day MA below at $43.23, a level that has not been touched since early July where support was found.

We are watching China “Bear” ETFs closely here as well and through October given the backdrop detailed above and these funds are specifically CHAD (Direxion Daily CSI 300 China A Share Bear 1X, Expense Ratio 0.84%), YANG (Direxion Daily China 3X Bear, Expense Ratio 1.10%), and YXI (ProShares Short FTSE China 50, Expense Ratio 0.95%).

FXI-2017-09-25

The iShares China Large-Cap ETF (FXI) was trading at $43.50 per share on Monday morning, down $1.08 (-2.42%). Year-to-date, FXI has gained 25.88%, versus a 12.25% rise in the benchmark S&P 500 index during the same period.

FXI currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 33 ETFs in the China Equities ETFs category.


Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.


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