FXI - China and market collapse

[whyherro]

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?

[DcifrThs]

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

[whyherro]

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.

[pureCra2z]

[ 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?

[/ QUOTE ]

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.

[pureCra2z]

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.

[spider]

[ QUOTE ]
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.

[/ QUOTE ]

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

[kimchi]

[ QUOTE ]
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?

[/ QUOTE ]

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