FXI - China and market collapse
 

Approximately 3/4 of a year ago, I allocated a decent percentage of my portfolio to FXI - a large cap China ETF. While not the most well researched investment, at the time I was very bullish on China's long term outlook primarily due to GDP trends and what I forsee as a duopoly b/w China and the US as soon as Chinese GDP and defense spending matches (overtakes) the US.

Obviously, this ETF has enjoyed enormous returns over the past year. While very familiar with corporate finance etc I have little experience trading outside of some well researched value plays I have made in the past. With this particular holding I feel like I am trying to time the tech market collapse. From a fundamental value perspective I can't help but think nearly all of the companies I hold in the index are overvalued.

On the other hand, for psychological (and political/legislative reasons) I feel like money will probably continue to pour into the chinese stock market.

So my question is, does anyone have any advice on how to deal with this situation? What is the most reasonable approach to thinking about buying more / selling my holding?

Re: FXI - China and market collapse
 

what does the rest of your portfolio look like? what % is this of your entire portfolio?

Re: FXI - China and market collapse
 

Rest of main portfolio (excluding some deleveraging from cash sitting around):
26% S&P500
20% Russell 2000
12% VGK - Europe ETF
12% FXI - China ETF
5% Japan ETF
5% Bet on Magna from a while back when you could buy it through the equity at 3.5x EBITDA after all the autos got slammed
10% Big bet on GS after all the financials got slammed, I am slowly selling this off.
5% TOL after the homebuilders traded off hard for the second time
5% HY bond fund

These are rough approximates off the top of my head.

Re: FXI - China and market collapse
 

[ QUOTE ]
Approximately 3/4 of a year ago, I allocated a decent percentage of my portfolio to FXI - a large cap China ETF. While not the most well researched investment, at the time I was very bullish on China's long term outlook primarily due to GDP trends and what I forsee as a duopoly b/w China and the US as soon as Chinese GDP and defense spending matches (overtakes) the US.

Obviously, this ETF has enjoyed enormous returns over the past year. While very familiar with corporate finance etc I have little experience trading outside of some well researched value plays I have made in the past. With this particular holding I feel like I am trying to time the tech market collapse. From a fundamental value perspective I can't help but think nearly all of the companies I hold in the index are overvalued.

On the other hand, for psychological (and political/legislative reasons) I feel like money will probably continue to pour into the chinese stock market.

So my question is, does anyone have any advice on how to deal with this situation? What is the most reasonable approach to thinking about buying more / selling my holding?

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I am in a similar position(have >20% in fxi now). My view is to ride it as long as possible util around summer 08(olympic). If the china market starts turning bearish, you will know it. I would like to see others chime in on this.

I also got a pretty big position in EWT(ETF for the Taiwan market) and do not know how long to hold it.

Re: FXI - China and market collapse
 

On another note, I thought about making short term plays(in addition to my current position) on FXI as the daily price shift is pretty big(~2-5% daily). I have never made any short term plays ever so I have yet to proceed with this thought.

Re: FXI - China and market collapse
 

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So my question is, does anyone have any advice on how to deal with this situation? What is the most reasonable approach to thinking about buying more / selling my holding?

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One of the most important things is to have objectives and a reason to sell before you buy. You need to define your reason for purchase and a situation which would force you to sell, trim, or add to your position.

I actively manage (now) over 50% of my basic fund portfolio and my strategy has had me initially 10% in Grt China (inc HK, Taiwan) and 10% in Pacific basin stocks for at least a couple of years now. These positions have grown to around 15-20% each of this portion of my account.

I'm not (too) worried though. When things change I'll get a flag and move the money elsewhere.

This 50% of my portfolio (the other 50% was B&H) has had me invested for the last few years in S.America, Pacific & China, Natural resources and a few switches in & out of gold, energy, bonds, and cash.

I keep thinking these sectors/areas have run their course, but each correction barely fails to flag a sale/switch. I suppose we just hang on until the ulmighty thump.

Edited to remind myself how much I lost during the 2000+ tech meltdown without any objectives, risk management, or strategy

Re: FXI - China and market collapse
 

china is obviously a bubble.....but im riding it till the olympics. id keep a tight stop-loss...if u trade with an e-broker you can setup automatic stops....say, if it drops 10% in one day youre automatically out, then rethink your position.

Re: FXI - China and market collapse
 

I'm new to investing and I'm slowly diversifying my non-retirement portfolio. This thread caught my attention because I was looking at FXI, solely because I have a friend who makes his living trading FXI. This is because, as pureCra2z pointed out, the stock is so volatile.

I'm interested in seeing what others think about holding this long term.

Re: FXI - China and market collapse
 

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solely because I have a friend who makes his living trading FXI.

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He only trades this one ETF? Please take a look at the 10yr chart for QQQ. Some people were trading this for a living back in 99-00.

Just the fact that there is so much speculation in this market should tell you that the time to sell is coming soon. You don't want to be the last one holding the bag.

Why not put a limit order in to sell when the price drops 10%? Adjust the limit accordingly as the stock continues its rise.

Re: FXI - China and market collapse
 

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Why not put a limit order in to sell when the price drops 10%? Adjust the limit accordingly as the stock continues its rise.

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I think you mean a stop (or a stop-limit) order.

Re: FXI - China and market collapse
 

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solely because I have a friend who makes his living trading FXI.

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He only trades this one ETF? Please take a look at the 10yr chart for QQQ. Some people were trading this for a living back in 99-00.

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I believe so. What I've gathered from him is that the price of the stock doesn't matter. Earlier in the year when the market was getting hammered were some of his best trading days. The more volume and volatility the more he makes.

Re: FXI - China and market collapse
 

One approach here is to think about target prices on the stock: regardless of the current price, at what prices do you consider this stock a strong buy or strong sell? I.e. don't worry about how much it rose, focus on what you think the price should be. If the price rose, but you think it is still a buy, then you should continue to hold, even if it rose by a lot.

A second approach is rebalancing: if you established FXI as 8% of your portfolio at a time when you thought it was fairly valued, then rebalancing suggests you should reduce it from 12% back towards 8% if you think it's still fairly valued.

Personally, I combine these two approaches on an ad hoc basis, depending on how strongly I feel about each approach at a given time. If I have a strong opinion that the price is too high or too low, that dominates my decision, but re-balancing always provides some useful moderation/diversification constraints.

Re: FXI - China and market collapse
 

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I am in a similar position(have >20% in fxi now). My view is to ride it as long as possible until around summer 08(olympic). If the china market starts turning bearish, you will know it. I would like to see others chime in on this.

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Maybe I'm just biased b/c I hate the Olympics, but I don't see the point of timing FXI based on the Olympics. Granted, the Chinese gov't would probably avoid doing anything to pop a bubble around the time of the Olympics but they could easily act before then and bubbles are quite capable of popping AT ANY TIME w/o any help from governments or central banks.

Note: I'm not saying it is or isn't a bubble, but lots of people seem to think it is obv.

Re: FXI - China and market collapse
 

can you short ETF's?

Re: FXI - China and market collapse
 

Almost always.

Re: FXI - China and market collapse
 

ETFs are one of the easier vehicles to short

Steve

Re: FXI - China and market collapse
 

The thing is, I am not sure a target price here makes sense. At this point I am pretty sure the underlying assets are fundamentally overvalued. The issue is that the burgeoning Chinese middle class do not have many outlets for investment. So long as this continues, and the West is infatuated with the prospects of Chinese growth, I think the ETF continues to rise. If, for some reason, the Chinese government relaxed trading rules for its citizens I am almost certain the ETF would plummet.

In this sense there is a structural element supporting the current valuation, and is why I feel like I am trying to time the collapse of the tech market.

Re: FXI - China and market collapse
 

i am in the same boat guys. i have big gains in FXI. i don't want to sell though because ill be forced to pay short term tax rate instead of the long term 15% tax rate.

Re: FXI - China and market collapse
 

I have had a relatively small position in FXI since the beginning of the year. I am still bullish on FXI. I think China will do everything to look good for the Olympics and I plan to increase my position very soon.

However, I am not very happy with the companies the index is composed of. FXI is not represetative of China/Chinese business. I would like to find something that better reflects the manufacturing sector. (It could be an American/Euro company that is tighly linked to China manufacturing) Any suggestions?

I was also thinking of trying to trade FXI. I might... Not sure yet.

Re: FXI - China and market collapse
 

its was up 5% yesterday and closed down.

Re: FXI - China and market collapse
 

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its was up 5% yesterday and closed down.

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My buddy seemed pretty happy with this. Apparently he doubled his month's earnings yesterday due to this.

Re: FXI - China and market collapse
 

up 5.4% today. stock is crazzzzzy

Re: FXI - China and market collapse
 

http://seekingalpha.com/article/49739-re...congress-begins

interesting article
sell monday and get in back later in the week? This is like trying to time the market. And the short term tax [img]/images/graemlins/frown.gif[/img]

Re: FXI - China and market collapse
 

I am loving FXI at the moment. What's not to love about a 33% gain over the last month.

OP, in my opinion you have a few choices on how to ease your anxiety about this.

1) The unsexy way... unload a part of your position now and take the profits. No shame in taking money off the table and putting to use in another area. Cut down your position by 25% or so to ease the worries a bit.

2) A stop or a trailing stop is a must for this ETF. With FXI being so crazy set a point that gives it room to move but also won't crush you if it crashes.

3) Ever try options? You might want to consider looking into some longer timeframed puts just to hedge your bet a little. Take a look at what is out there for the next few months as well as the Olympics(when are those anyway?)

Re: FXI - China and market collapse
 

Probably not going to mess around with any options, I try and stay away from markets I don't understand as well as I would like. I think the right plan is to probably just hold off for a couple of months until long term gains click in and then sell off the position.

I don't think there is a ton of sense in unloading 25% of the position right now, between trading expenses and the unfavorable tax treating you have to implicitly assume a pretty monster dive in the stock to justify such a move.

Re: FXI - China and market collapse
 

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Probably not going to mess around with any options, I try and stay away from markets I don't understand as well as I would like. I think the right plan is to probably just hold off for a couple of months until long term gains click in and then sell off the position.

I don't think there is a ton of sense in unloading 25% of the position right now, between trading expenses and the unfavorable tax treating you have to implicitly assume a pretty monster dive in the stock to justify such a move.

[/ QUOTE ]

FWIW, I plan to hold on to FXI. (I currently have ~25% in it)

Re: FXI - China and market collapse
 

I've wanted to invest in "china" for awhile now and just didn't know the correct vehicle. This seems to be it.

I am just super hesitant to put money in when the index is at a 52 week high. I think if it goes down at all monday I'm going to put money in first thing Tuesday morning. I want to see what happens with the peoples' meeting first.

Re: FXI - China and market collapse
 

I sold FXI today.

Re: FXI - China and market collapse
 

I just tried to short FXI and it says "Shares of this security are currently not available to short sell". Why?

Re: FXI - China and market collapse
 

Re: FXI - China and market collapse
 

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I just tried to short FXI and it says "Shares of this security are currently not available to short sell". Why?

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This might have something to do with the fact that the Shanghai stock exchange does not allow shortselling....AFAIK

Re: FXI - China and market collapse
 

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I sold FXI today.

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Can you explain why exactly today? Why not a month ago at 140 or a year ago at 60 ?

Re: FXI - China and market collapse
 

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I just tried to short FXI and it says "Shares of this security are currently not available to short sell". Why?

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This might have something to do with the fact that the Shanghai stock exchange does not allow shortselling....AFAIK

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since this is an american ETF that doesn't apply. There just aren't enough shares to borrow with that broker.

Re: FXI - China and market collapse
 

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I just tried to short FXI and it says "Shares of this security are currently not available to short sell". Why?

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Why do you want to short this? Do you want to place a short-stop or are you going to short it at whatever price you can get?

What are your objectives, and how much risk are you exposing yourself with this trade? Also, what are you targets, if you have any?

Re: FXI - China and market collapse
 

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I sold FXI today.

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Can you explain why exactly today?

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because i think its overvalued and i don't feel like trying to guess when the bubble is going to pop.

Re: FXI - China and market collapse
 

FXI up big today.
I wonder how the people's meeting will affect it.

Re: FXI - China and market collapse
 

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FXI up big today.
I wonder how the people's meeting will affect it.

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By "people's" do you mean Lebron James? [img]/images/graemlins/smile.gif[/img] Just heard he is in China today doing an exhibition game. Man he has a lot of endorsements!



Jimbo

Re: FXI - China and market collapse
 

fxi is so sick right now. up 7+% today as of this post.

Re: FXI - China and market collapse
 

Wow, up 9.4% After work I'm going rock climbing with my buddy who makes his living trading this. I'm making him buy beer afterwards. Good beer.

Re: FXI - China and market collapse
 

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fxi is so sick right now. up 7+% today as of this post.

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all chinese stocks went up today due to some news about the US shares being made convertible into Chinese/HK shares. I didnt pay close attention but this should make it easier for US investors to buy directly into chinese companies, hence the rise.