Tuesday, June 15, 2010

Climbing a great wall

Impressive. The FXI has behaved rather nicely after diving into full-blown correction territory (a decline of more than 20%). Powerful is too strong a word to describe the bounce, but it's been a respectable response that has clearly helped copper stocks like FCX and even US Steel (X).

Michael Yoshikami is extolling the virtues of tip-toeing into Chinese equities here, with the FXI still in corrective turf (-23% year to date). He touches on the real estate nightmare ahead for China and insists that the problem is being curtailed in advance. I just don't believe any of that just yet, but he has a point.

I have no trouble with the concept of trading Chinese stocks as long as they are liquid and plausibly potent. In other words, I'll trade BIDU but not a Chinese penny stock. If the real estate market there blows up as badly as the mortgage/credit crisis did in the US in 2008-09, uh ohhh ...

The new policy puts a lid on housing speculation, i.e. flipping. So much for the future of late-night real estate informercials in Guandong, Shanghai, Harbin and all points in between. We may be deprived of the next Tom Vu, post-Mao style. (I know he's from Vietnam, but most of the refugees who left in the 1970s were Chinese in ethnic origin.)

Meanwhile, progress continues ...

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