In This Post:
- Two Big Divergences
- US China Large Caps Diverging
- Market In China
Market In China – Two Big Divergences
Despite the fact that the US market is roaring, the Chinese market still looks to be rather Ursine (a fancy Latin work for bearish).
But wait- Is it really still a Bear Market for China stocks, or are the China markets looking up?
The Shanghai A shares- the China equivalent of our S&P 500, still looks pretty darn weak.
There’s been a little bit of resurgence in this index. There’s also a week of trading missing as this market was closed last week for Chinese New Year, and they are just getting underway in China again.
This index is struggling to get through its 50DMA, which would confirm at least a short term up trend is getting underway. It’s not even close to its 200DMA, which would confirm a longer term bullish trend when we see those levels pierced.
The Shanghai A shares were down about 36% in 2011- as I like to say- an absolutely brutal year.
US China Large Caps Diverging the Market in China
The performance of the Shanghai A shares is anemic compared to China stocks trading with US listings.
Let’s start with the Granddaddy of all the ETFs- FXI is the China 25 Index fund- it represents China’s equivalent of the DOW, and contains the 25 largest public companies in China. These are the mega caps owned partially by the government.
The FXI is showing far greater signs of life than the Shanghai A shares, having broken above its 50DMA in January, and well above its 200DMA, suggesting all is well in China Large Cap world.
Here’s the charts of two individual stocks that are still featured by EmergingChinaStocks- check out Baidu (NASDAQ: BIDU) and Sina Corp (NASDAQ: SINA).
Here’s the Google of China:
BIDU has been on a 25 point tear this year, and on Friday managed to trade above the 200DMA for the first time since November. I suspect the 200DMA will become resistance for a little while, but that stock looks headed to break through that barrier rather easily.
SINA is a little bit more like the Yahoo! of China with a lot of mobile and digital entertainment components.
As you can see, this stock has run up nearly 30 points in the last month, and is gunning for its 200DMA. SINA was one stock short sellers absolutely vilified when it looked like the government might restrict some of their content. It really never happened.
The Shanghai A index is trailing the US large caps at this time. The China stocks are trading as if the investment community is now expecting a “soft landing” scenario in China.
China small caps are not trading as well as their larger brethren yet- but they will catch up as soon as there are some big break outs. Shorts are covering, but still have huge positions, and as these stocks trade up on lighter volumes, short sellers are going struggle with closing out their positions at lower prices.
One of my 3 favorite China stocks rocketed to a level it hasn’t seen since early September on Friday. The two others had a sideways week, but earnings are coming soon.
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