An interesting article in Caixin Online cites reports suggesting that “hot money” coming out of the hyper-inflated Chinese real estate market will find its way into stock shares in the coming months. This could flip Chinese equities from laggards to leaders; the FTSE/Xinhua 25 is down a little more that 1% for the year, while the Chinese small cap index is up over 5%, vs. a gain of 9% for the S&P 500.
Chinese monetary authorities have pumped huge liquidity into the economy, and seem to be moving very slowly to reverse policy. Analysts both inside China and abroad have cautioned that an unsustainable real estate bubble has developed. A shift toward equities would bring us a nice opportunity to take advantage via ETFs such as FXI, GXC, and HAO. The latter already shows a bullish chart pattern with good money flow, while it’s large cap counterparts are more neutral.