FXI - China and market collapse

[Badger]

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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.

[spider]

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.

[spider]

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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.

[xxThe_Lebowskixx]

can you short ETF's?

[pig4bill]

Almost always.

[SteveOMS]

ETFs are one of the easier vehicles to short

Steve

[whyherro]

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.

[xxThe_Lebowskixx]

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.

[dc_publius]

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.

[xxThe_Lebowskixx]

its was up 5% yesterday and closed down.