By Paul Goodwin , Analyst and Editor of Cabot China & Emerging Market Report
From Cabot Wealth Advisory, 2/9/09 Sign up for free Cabot Wealth Advisory e-newsletter
My investment idea today is more of a macro play than I usually recommend. It's an exchange-traded fund called iShares FTSI/Xinhua China 25 Index (FXI). The name is a mouthful, so I'll just keep calling it FXI.
The FXI follows the Dow Jones Industrial Average of China, representing the performance of 25 of the largest and most liquid Chinese stocks that trade here in the U.S. As such, it serves as a snapshot of the health of the market, not rising as fast as the hottest Chinese stocks, but not falling as quickly either.
It's a macro play because owning it gives broad exposure to China. It's a good choice for right now because the issue has been rising strongly since the middle of January and recent volume clues—specifically, above-average volume on February 4 and 5—indicate increasing institutional interest in the future of Chinese blue chips.
Investments like the iShares ETF provide a chance to benefit from a macro story like the continuing growth of China without doing the detail work to select likely winners from among all of the Chinese stocks that trade as American Depositary Receipts, or ADRs, on U.S. exchanges.
In mid-January FXI was trading at 23. Now it's at 28. There is possible resistance at 31/32 from December and January, but another piece of good news to silence the China doubters could sweep that all away. I think it's a reasonable bet.
Editor's Note: Cabot China & Emerging Markets Report was the top-ranked newsletter for 2006, 2007 and most of 2008, according to Hulbert Financial Digest. Right now, editor Paul Goodwin has his eye on the Report's disciplined China Timer that will tell him when it's time to dive back into the market. The timer has kept him out of the market for much of its downturn, preserving capital for the next bull market. The best time to get onboard a stock is before it's made its major upmove. Click here to get started before the next big upmove passes you by.
Paul Goodwin
Emerging Markets Specialist, Analyst and Editor of Cabot China & Emerging Markets Report
A researcher and writer for over 30 years, Paul Goodwin has been a member of the Cabot investment team and editor of
Cabot China & Emerging Markets Report since 2005. Under Paul’s stewardship, Hulbert Financial Digest rated Cabot China & Emerging Markets Report the number-one-rated newsletter of 2006 with a 78.6% gain for the year, the number-one-rated newsletter of 2007 with a 74.1% return, and the top-performing investment adivsory for five years with a 17.9% annual return.