China Large Cap : Ready to accelerate upwards? (FXI) – 07/07/17

We integrate The ETF iShares FXI (China Large Cap), which tracks the performance of an index composed of large-capitalization Chinese equities that trade on the Hong Kong Stock Exchange. 

• China's manufacturing activity grew faster than expected in June 2017. According to China's National Bureau of Statistics (NBS), the manufacturing Purchasing Managers Index (PMI) increased to 51.7 in June compared with 51.2 in May and above market estimates of 51. Moreover, China's services PMI increased to 54.9 in June compared with 54.5 in May. Improvement in both these measures is indicative of resilience in the economy, and the momentum provides some respite considering the looming debt problem faced by the country. Recently, MSCI announced its plans of including China's mainland shares to its benchmark emerging markets index, a positive for Chinese stocks, while investors remained concerned about the Chinese economy because of the massive debt problem.
• FXI seeks to provide exposure to Large Cap Chinese equities, serving as a pure play on the economy. It has a liquidity amount of $3.2 billion and is a relatively expensive bet, as it charges a fee of 0.74%. Financials, Energy and Information Technology are the top 3 allocations of the ETF, with 51.4%, 11.6 % and 10.8% exposure, respectively with Tencent Holdings Ltd, China Construction Bank Corp and China Mobile Ltd. As the top three allocations of the fund with 9.2%, 8.5% and 7.6% exposure. FXI has returned 14.7% year to date and 17.7% in 2017.
• Technical analysis shows an index that seems ready to accelerate upwards after several weeks of wavering. The moving averages and the oscillators are well oriented, but the momentum is actually rather soft. The positive newsflow could lead to an acceleration of the index in the coming weeks while the risk / remuneration seems rather attractive on FXI

Graphique FXI, données hebdomadaires :