Clear Resistance Above $FXI, April China PMI, Jim Chanos on Fox, Vitaliy Katsenelson Report, Charts (Shanghai Composite, Hang Seng, $FXI, $EWH)

Jim Chanos was on Fox Business last week chatting with Charlie Gasparino about the potential property bubble forming in China. He thinks China's growth is on a treadmill to hell and the property boom is a house of cards.  It might be time to hedge China or potentially ride a retracement (in my opinion).  Options are getting more expensive though.  Implied volatility on FXI and EWH (option premium) has been creeping up since March, FXI (25 to 33), EWH (19 to 24).  Way off the peak though.  The Government is tightening up and could affect growth going forward. People talk about Greek contagion affecting Europe, what about China contagion (US market, commodities)?  I charted out the Shanghai Composite, Hang Seng, Hong Kong ETF (EWH) and China FXI and they broke the uptrend line.

China property, manufacturing slows as economy starts to cool [ Telegraph.co.uk]
China's manufacturing activity slows: HSBC - [AFP]

HSBC China April PMI falls to 55.4 vs 57.0 in March [Reuters]
Tough rules set to drop home prices 30 percent - [China Daily]
UPDATE: China Yuan Down Late On Reserve Requirement Ratio Hike [Wall Street Journal]
Luxury home prices down, thanks to new regulations [China Daily]
I’ll Tell You When Chinese Bubble Is About to Burst: Andy Xie BloombergBusinsessWeek]


If you remember on February 23, 2010, Goldman ($GS), the Shanghai Index ($SSEC) and the PIIGS (Portugal, Ireland, Italy, Greece, Spain) were all trading BELOW their 200DMAs. After a few whipsaws, the 200 day moving average resistance level is still holding (Charts, 2/23). Along with Jim Chanos (see the 45 minute presentation Chanos made on China), Vitaliy N. Katsenelson (CFA Director of Research / Portfolio Manager at Investment Management Associates) put out a detailed research report explaining why China is the "mother of all black swans", or unforeseen events. I embedded it below.



China - The Mother of All Black Swans by Vitaliy Katsenelson - April 2010


Look at the charts of China. There were clear uptrend breakdowns as you can see.  For FXI, $36 looks like the first support level and 38.2% retracement.  If you look at the Shanghai Composite going back to 2001, 2233.75 looks like a support level.  EWH, the Hong Kong ETF, pierced the 200dma and could revisit $14.25 first.  Support for the Hang Seng Index hits around $17,761 from 2000.

FXI Monthly (FreeStockCharts.com)

FXI Daily Chart (Zoomed In)

SSEC, Shanghai Composite

EWH (iShares MSCI Hong Kong Index Fund ETF)

Hong Kong Hang Seng Index

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