Lighting The Chinese Fire

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May 11, 2011 4:11pm NYSE:CAF NYSE:FXI

It looks as if China is starting to reignite growth, as we’ve seen Chinese consumer price index (CPI) and the April trade surplus come in above market expectations, as the country tries to balance


 keeping up strong economic growth, with keeping inflation in check.  It’s been a tough balancing act, but from abroad, it looks as if China has gotten it right, and initiated a soft landing.  The soft landing has not helped the stock market, but it looks like China is starting to focus a little more on growth now, and if that’s the case, then there are a few ETFs to consider to play this trade.

One ETF to consider is Morgan Stanley China A Share Fund, Inc. (NYSE:CAF), which tracks the Shanghai Composite A shares in China.  It’s a thinly traded ETF, and has just under $500 million in assets under management.  Brian Kelly, of CNBC’s Fast Money, has been positive on the name, and has recently said that he is buying shares in anticipation of such a move in China.

The other ETF to consider trading is iShares FTSE China 25 Index Fund (NYSE:FXI).  From Yahoo Finance, the fund is described as: “The investment seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE China 25 Index.”  It has a 0.72% expense ratio, compared to a 0.74% expense ratio for others in its category.

Trend Analysis:  Both CAF and FXI have been in an uptrend since last week, and are up 5%, and 3% respectively for the year.  If China continues to reignite growth, this could change significantly.

Risk Analysis:   If you like China at these levels, be sure to first determine your risk and protective exit strategy.   As SmartStops.net shows, for FXI,  potential problems could arise if it should break the current price point of $43.26, and CAF crosses below $27.66.    Remember to always know your exit strategy!

Written By Chris Johnson A SmartStops.net Contributor 

SmartStops.net provides an easy to use web-based service that helps you know how much to invest,  monitors your portfolio and alerts you when any of your stocks or etfs show signs of weakness or are “at risk”.    Risk Alerts are emailed real-time to help you take action.  Daily portfolio monitoring reports allow  you to also set conditional exit trades proactively.

SmartStops new breed of service that more easily and precisely monitors and controls investment risk is powered by the SmartStops analytic engine which  incorporates sophisticated trading methodologies developed over 40 years of trading experience.  Many of the SmartStops methodologies have been used by some of the world’s largest wealth funds for decades.  We help protect our clients’ stock investments with exit oriented solutions – where most investors are underserved by current solutions.  Subscribers’ portfolios are actively monitored for indications of risk using sophisticated and proven analytic models.


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