I invested in CHN recently and am looking to add IFN in a few days at the next short term (daily stochs) market bottom.
I would suggest you use the yahoo charts to compare the ^SSEC & FXI. You should be able to see that FXI ( a derivative of several stocks in the Chinese stock market) is almost 40% overvalued compared to the Chinese index itself.
The following link may be used for this purpose.
http://finance.yahoo.com/
echarts...ource=undefined
FXI is only 25 large cap Chinese stocks that are also listed in HK (H-Shares). It is also denominated in USD which has fallen relative to the Yuan pushing up its value.
The yuan has not appreciated by 40%. From the low several years back the yuan has appreciated by about 12%.
At the most FXI should be 12% above SSEC assuming your interpretation of the currency appreciation is taken into consideration.
However, the SSEC index is falling, and I would be reluctant to pay a premium for a falling index.
In addition, inflation is increasing in China, and the Chinese government is cutting credit.
Moreover, the US is cutting down on its imports from the rest of the world. At some point this will affect Chinese exports.
This argues for a continuation of the existing trend.
Yesterday, the SSEC index fell 5.5% to 3,413. This is 142 from the low reached this year.
If we measure the low in June of 2005 and the high in October of 2007, then 3,413 is below the 50% fibo ratio (at about 3,500). The 61.8% fibo ratio is below 3,000. This also argues for a continuation on a technical basis for the downtrend to continue. In fact, due to the almost extreme parabolic increase of the SSEC index on its way up, this argues for an extreme oversold condition on the way down. We are not there yet.
CHN is a good way to play the "Greater China" market IMO. They shifted money from the mainland to Taiwan just before the big collapse. And they also can invest in private equity in China, which may have less valuation issues.
Thanks for all the comments.
I agree that CHN is an interesting choice. It used to have a huge premium but it has melted away into a big discount.
Seems that I'm getting more feed back on China than India which is curious since the Indian market is technically better positioned.
ML
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