During periods of strength, I typically encourage investors seeking exposure to China to turn to the small-cap HAO; the fund's focus on smaller names allows investors to take advantage of the nation's blossoming consumer class. However, if weakness persists and Moody's observations hold up, the outlook for FXI appears more optimistic.
Bigger may look better when it comes to China, for now, but FXI is not without its challenges, either. On the contrary, in addition to a prolonged economic slowdown, interference on the part of China's government could be enough to stifle strength.
This week, Chinese Premier Wen Jiabao hinted that such an intervention may be in the cards. In comments made to China National Radio, he noted that China's bank monopoly needs to be broken.