China already loser in Shanghai Olympics

Posted Mar 18th 2008 11:20AM by Zack Miller
Filed under: China

Have you taken a look at China? Wow. All those voices that have said that China is going to the moon. Have you taken a look at the FTSE/Xinhua China 25 Index (NYSE: FXI) lately? It's down over 40% from its recent highs and looks to be headed lower -- at least for now. Investors who used the Proshares Ultrashort FTSE/Xinhua China 25 Index (Amex: FXP) would have fared a lot better as such an index tries to use leverage and outperform the inverse of the China index. In other words, the FXP shorts the Chinese market. It's up almost 50% just year to date.

According to an article at MarketWatch, China's retreated for the 5th straight day on worries of continued monetary policy tightening by the Chinese central bank.

Although the EU has ruled out an Olympic boycott over the violence in Tibet, what's happening there is certainly adding to the feelings of a quickly growing economic and political power running amok. In typical fashion, Europe refuses to speak out against such types of aggression. According to the FT, Mark Malloch-Brown, the UK's minister for Africa, Asia and the United Nations, told the BBC: "This [the Olympics] is China's coming out party and they should take great care to do nothing that will wreck that."

With the way the Chinese and Hong Kong stock markets are behaving, it doesn't look as though the princess will be ready for her coming out party in a few months. It's probably going to take more time as China's growth is forcing it to deal with hard issues such as soaring inflation, domestic unrest, and heavy-handed politics.

Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.

Tags: china, fxi, fxp

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Reader Comments (Page 1 of 1)

3-18-2008 @ 1:04PM

Sammy Z. said...

Zack,

This is just so lame... first of all, it's Beijing Olympics, not Shanghai. I presume you don't care one way or another, you ignorant mind probably can't find Canada on the map, so Shanghai is close enough...

Then, what "hard issues" are you talking about? Why would you be a sour grape about Chinese having a good party this year? Look at the melting stock market, the sinking green back, the housing mess, the Iraq, the Patriot act, we Americans are still feeling like the King of the world, no? Then why can't Chinese just be half as optimistic as us?

3-18-2008 @ 1:27PM

Matt said...

Sammy-
Considering this blog is called bloggingstocks.com, I'm sure Zach is using 'Shanghai Olympics' as a metaphor for the market. I would hope anyway.

Zach-
Mostly agree. Seems the lining of the China bubble has grown extremely thin under global pressure. I'm sure the central government will implement some more domestic measures for the SZSE and SSE in 2008 to ensure that the local, emotional investors don't lose more of their tails than they already have.

Although I still would not put any hope on FXP, the chart looks more like a saw blade than anything else.

3-25-2008 @ 3:36PM

Peter said...

This article is so biased and misinformed. It was the rioters that started the violence and killing people on the streets. The Chinese government did the right thing to protect the citizens from these violent rioters.
The writer of this article is the loser, a racist against the Chinese people and should apologize now.