Chinese Stocks in a Choppy Sea
The realm of Chinese stocks has been akin to navigating choppy waters. The allure of value in these equities, combined with the potential rise of the Chinese economy, stands in stark contrast to the looming shadow of geopolitical tensions between the U.S. and China. The threat of trade barriers and possible delistings of Chinese companies trading on foreign exchanges adds a layer of uncertainty to the mix.
FXI ETF: A Glimpse at the Top Dog
The iShares China Large-Cap ETF, FXI, is a vessel sailing through turbulent times. With a share price just over $25.50 and substantial assets under management of nearly $4.24 billion, FXI carries the weight of over 31.25 million shares traded daily. Despite a manageable 0.74% management fee, the ETF is anchored by top holdings such as the powerhouse Alibaba Group (BABA), often dubbed as the “Amazon of China.”
Signs of a Weakened Trend
The FXI ETF paints a picture of a downward trajectory, reminiscent of a deflating balloon. Before the 2008 financial crisis, FXI soared to a record high in October 2007 only to plummet to lows in 2008. Despite finding some stability in a narrow trading band from 2009 to 2022, the ETF broke below this range in 2022. The journey since then has been marked by lower highs and lower lows, akin to a ship struggling to stay afloat in a stormy sea.
A Tale of Diverging Fortunes
While Chinese stocks falter, their U.S. counterparts shine bright like stars in the night sky. ETFs tracking the tech-heavy NASDAQ, the Dow Jones Industrial Average (DIA), and the S&P 500 (SPY) have set sail towards new heights, leaving FXI lagging behind. The contrast between the towering U.S. stock market indices and the struggling FXI reflects a stark dissonance in market sentiment.
Charlie Munger’s Contrarian Wisdom
In the realm of investing, seeking value is akin to mining for gold in a vast mountain range. The late Charlie Munger, famed for his partnership with Warren Buffett, left behind a legacy of contrarian wisdom. His belief in the future potential of the Chinese economy and the strength of Chinese companies echoes like a whisper in the wind. Will his faith in “cheap” Chinese stocks bear fruit amidst geopolitical storms?
Seeking Calm Waters in a Turbulent Sea
While the FXI ETF struggles to find its course, investors scan the horizon for signs of a turnaround. The charts hint at a bearish trend, with resistance levels and support zones mapping out the rocky terrain ahead. The journey ahead for Chinese stocks remains uncertain, with the ghost of geopolitical turmoil casting a shadow over their fortunes.
