This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Emerging Markets Decline with China

Stocks in this article: FXI EEM

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By David Gillie

NEW YORK ( ETFDigest) -- It seems surreal to read a negative headline about China. During a decade of double-digit growth, ETF issuers scrambled to compile holdings in China's booming economy.

Not only was China manufacturing nearly every piece of furniture, toy, gadget and household item for America's insatiable consumer economy, the country was also building its own gigantic infrastructure. China has been the center of the universe and everything revolved around them.

The raw materials for every aspect of manufacturing were drawn from everywhere in the world: petroleum, copper, steel, aluminum, chemicals, rubber, etc. Exporters of these raw materials, many of which were emerging markets, enjoyed expanded economies to meet the enormous demands.

The global recession, which hit a pinnacle in 2008, slowed the demand for China's goods and the ripple effect has hit its suppliers. Furthermore, China's own economy saw such rapid expansion that it became necessary for China to impose slowing to prevent runaway inflation.

China's growth rate slowed to 8.7% in the fourth quarter of 2011. Estimates of first-quarter 2012 are around 7.7% with projections for the rest of the year around 7.5%. These percentages may sound like a dream come true for an American reading this as the U.S. economy claws its way to the hope of 3% growth. However, this represents as much as a 45% decline from the peak of China's growth estimates. Economists are discussing "hard landing" or "soft landing"?

Follow TheStreet on Twitter and become a fan on Facebook.

iShares FTSE China 25 Index (FXI) has become the gauge many investors use to measure the health of China.

The holdings of FXI are dominated by the Chinese banking industry. As the world went to China to finance their debt, led by the U.S., it's uncertain how much of Europe's defaulting debt is held by Chinese banks. It would be a reasonable assumption, because there were few others with the financial means to support this level of debt, China would have significant exposure.

China is by no means "closing up shop" though. With historic first-quarter gains in the U.S. market, despite economic data to support it, China's market rose in the euphoria. However, FXI lost its momentum at the beginning of March.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,959.44 +154.64 0.87%
S&P 500 2,078.54 +7.89 0.38%
NASDAQ 4,781.4240 +16.0440 0.34%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs