NEW YORK ( ETF Digest) -- China remains one of the world's fastest growing economies. It continues to intrigue and draw investors to it which began in earnest after 1979's Deng Xiaoping admonition "to grow rich is glorious." The high rate of economic growth has positive implications for investments opportunities. At the same time high rates of growth create inflationary pressures which can quickly cause turmoil and losses for linked equity markets.
Many pundits believe China's growth has led to inflation currently and excess speculation in real estate markets has created a bubble. Over the past 18 months, Chinese authorities have acknowledged this concern by tightening bank reserve requirements to reduce speculative lending. Plus, many bearish pundits believe a break in the real estate bubble will bring China's economy down.
As this update is being written the Chinese economy is contracting and there is much speculation whether the economy will suffer a "hard" or "soft" landing. No one has the answer for this including Chinese authorities. All we can see from our technical observations is equity markets are breaking down.
There still remains a level of regulatory and corporate governance mistrust among some investors questioning the accuracy of accounting standards and enforcement. From a personal view, when I visited the recently opened stock exchange in Shanghai in 1992, our little group had a private session with the exchange Chairman. He was queried about this concern and responded by saying, "we will adopt American rules." Well, that may not give us much confidence.There aren't many established ETFs beyond our list of 10. Some within the listing are new and have yet to be seasoned. Without question there will be many more issues coming forth as time passes and issuers are able to create new products especially linked to new sectors within the market. We feature a technical view of conditions from monthly chart views when possible. Simplistically, we recommend longer-term investors stay on the right side of the 12-month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short. Some more interested in a fundamental approach may not care so much about technical issues preferring instead to buy when prices are perceived as low and sell for other reasons when high; but, this is not our approach. Members to the ETF Digest receive added signals when markets become extended such as DeMark triggers to exit overbought/oversold conditions. For traders and investors wishing to hedge, leveraged and inverse issues are available to utilize from ProShares and Direxion and where available these are noted.