NEW YORK (TheStreet) -- Earlier this year, things appeared to be looking up for Chinese real estate developers who have endured regulatory pressures in recent years from the bubble-fearing Beijing government.At the start of February, the sector breathed a sigh of relief following reports that the nation's central bank had pledged its support for first time homebuyers looking to secure a loan. A number of municipalities, fearing that negative economic fallout would result from a steep housing downturn, have also stepped into the ring, hoping to convince the central government to back away from its restrictive stance. Evidence of the improving mood surrounding China's housing market could be seen across real estate-heavy products like the iShares MSCI Hong Kong Index Fund ( EWH) and the Guggenheim China Real Estate ETF ( TAO). The two funds witnessed steep run-ups during the opening months of the year, with the latter closing out February at its highest levels since early August.
This news, combined with reports that China had pared back its 2012 growth forecast to 7.5% has created a great deal of turmoil for funds like TAO and EWH. In a matter of days, both funds have given back multiple weeks' worth of gains. As we have seen in the opening months of the year, there is still a great deal of uncertainty surrounding China's real estate market. While single events may be able to drive funds like TAO to short-term bounces, the long-term picture is still too cloudy for my taste. FXI). As usual, any exposure should be kept small. We have been reminded over the past few days of how volatile emerging markets can be. Written by Don Dion in Williamstown, Mass.