iShares Xinhua China 25 ETF (FXI)

He does like China a lot, but doesn’t actually have exposure. Alternatively, he would look into their consumer space with PowerShares USX China (PGJ-N).

(A Top Pick Nov 28/14. Down 4.82%.) He still likes this. Has a nice base from 2009 to 2015. He is looking for a nice break out from its base. With China being focused on creating a domestic economy, he thinks it is just a matter of time. From a risk/reward perspective, you have to have a Chinese component in your portfolio.

China is an area where he is doing a lot of work on. He is not directly involved in it because it is kind of in the twilight zone. He is being a little more cautious on China. A typical broad Chinese market will tend to have some stabilizers in there, such as banks and telcos. You may want to wait on this because the USSNP (?) market has to stabilize, and not moving around by 2% per day.

An ETF on the China situation? The 10 year chart shows a financial crisis peak in late 2007 with a low in late 2009. This was followed by a rebound bull followed by a long sideways period of congestion. It seems to be finally trying to break above the peaks in the congestion, so he thinks it is probably just getting underway. It looks interesting. The strong US$ may hurt the performance a bit. (See also ASHR-N)

The Chinese market is up 58% this year, but down 45% from its peak in 2007. They have some really favourable tailwinds right now having a really accommodative central bank and the growing middle class.

He would prefer to stock pick because in his business he should be able to outperform the index.

This is an ugly looking chart and we are at the tail end of a long slide that went back to 2007-2008. Chart shows that it has moved into an encouraging higher range in the last few months. It also ranks very well and is at the top of his heat mapping, which compares all the countries in the world where you can invest. There have been a lot of slow downs in housing, exports, etc. In a population of 350 million, there is a middle-class being created. This is probably something you would hang on to for 5-6 years with a little bit of volatility.

The 25 largest Cap stocks in China. China is down 60% from 2007. Pretty volatile. From a fundamental and risk perspective, things have been lining up. There has been a lot of bad news come in. This is more for a long-term Buy and Hold investor.

(A Top Pick Feb 12/14. Down 6.78%.) A classic example of how to treat a seasonal trade is that in this one you buy China just before the Chinese new year with some good political and economic news thereafter. It started off very nicely. Shortly after that the stock established a downward trend and was below its 20 day moving average.

Heavily skewed towards financials. Chose this because it has good liquidity. Historically, just prior to the Chinese new year, the Chinese market tends to bottom. Then after the Chinese new year is over, government officials come along and doing nifty things to help the economy. This is happening again. Earlier this week, the Shanghai index broke above a gorgeous little base building pattern and has now established an upward trend. This trait has worked 15 of the last 20 periods with a return of 9%. This runs from the beginning of January right through until the end of April of each year.

(He buys individual banks, not ETFs.) Instead of this, you could just go direct and buy some of the ADRs such as China Mobile (CHL-N). Trouble with ETFs is that you are going to have some movement and you may not know what is responsible for it.

(A Top Pick Nov 6/12. Up 7%.) Seasonal strength is normally from Oct 28, on average to May 5. Sweet spot is from December 15 right through until the middle of April. There was a technical Buy signal on China yesterday. This sector looks particularly fascinating right now.

With political corruption in China, how safe is this ETF? These are the 25 biggest companies in China. If you believe that China has the worst behind it, and it has some interesting growth prospects over the next 2 or 3 years, it is a good ETF to trade. If he couldn’t trust or be comfortable holding any investment in China, he would stay away.

He would much rather own individual Chinese companies rather than having broad, big state owned enterprises especially one that has a lot of banks. Chinese banks are very, very difficult to analyze.

This one has a seasonal low point, normally around October 28 and peaks right around May 5, which is identical to North American markets. This year, China is starting to show early signs of growth. There is an important change in regime in China this week with individuals who are much more progressive and want to get the Chinese economy moving. If the Shanghai index gets above 2,145 and breaks a head and shoulders pattern, it goes to significantly higher levels.