The number one Chinese ETF, FXI US, has been performing well since January lows. We have been outlining our bullish logic on China and Asia over past weeks, last note here.
The FXI has run up right to the late November high, which has been an important resistance level. Note the 200-day average here as well. Momentum is strong and we would not be surprised to see a slight overshooting as China bears run for covering shorts.
The long FXI versus short SPY trade has performed well since last autumn.
The US/China Trade talks and a slowing Chinese economy is still an unresolved topic and is according to most strategist the top risk for 2019, the known unknown.
Interestingly enough the correlation between the SPY and the FXI has shot up higher since last autumn. It seems China´s “problems” are not only China´s.
China is in most investors eyes a much riskier place to be in than the US. It is therefore interesting to note that the historical volatility on the FXI US trades lower that the historical volatility on SPY US. Note the recent gap between the two.
Over past 10 years we have not seen historical 30-day volatility of the FXI US trade below the SPY US.
FXI US implied vol (blue) versus 30-day historical vol (white) is at levels where we have seen it hold several times during 2018.
Pick your blue or red pill, but expressing the view via the FXI is looking relatively interesting.
Source; charts by Bloomberg