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Chinese stocks are at a 20-year low and trading at 10x PE, indicating a lack of investor confidence. The ETF consensus EPS growth of 12% is in line with the S&P 500 while the Chinese economy growth a twice the US. FXI suffers from weak diversification with large weight in the struggling Banking sector.
China has long posed the greatest – and most obvious – risk to financial markets. This is why financial advisors in the U.S. have refused to allocate into any China-related funds.
MCHI: Chinese Stocks Finally Get The Policy Green Light
We think that Chinese stocks are "fool's gold". Buy high-yielding US stocks instead.
While the Year of the Rabbit went wrong for the broader Chinese market, the Year of the Dragon may bode well for China ETFs on the back of policy support.
China's stock market is experiencing a crash due to its economic slowdown and accelerating financial market crisis. The Chinese economy is based on debatable data and relies heavily on building properties and infrastructure that will never be used, which creates immense private debt burdens. The CCP's multifaceted efforts to stimulate its economy are failing, indicating the bubble pop can no longer be delayed.
China's stocks have endured serious declines, with the median stock down over 20% amid government missteps in stabilizing markets. Beijing has been pursuing a piecemeal strategy to inject stimulus into select sectors like real estate to prop up growth.
China's securities regulator said on Monday that it would tighten scrutiny of margin financing, malicious short selling and seek to ward off risks involving pledged shares.
Chinese stocks suffered another rout on Monday, with a gauge of small-cap stocks trading on the mainland slumping nearly 9% at its lows, as former U.S. President Trump threatened a renewed trade war should he win re-election in November.
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