Losing For Winning In Chinese Stocks
Dragonfly Capital | Oct 02, 2014 08:09AM ET
The Shanghai Composite is on holiday for National Day and it deserves it. It has been on fire. Since it broke out of triangle consolidation pattern in late July it is up over 15%. And you saw it coming from the technical view on the chart below. So why are you not winning?
The problem has many answers but the simplest is that you cannot actually buy the Shanghai Composite. You can buy the iShares FTSE/Xinhua China 25 Index (ARCA:FXI) that has some of the biggest (read government sponsored) stocks and that should do you pretty well. But if you bought it on July 23rd, the day the Shanghai Composite broke out, you are not only not up 15%. In fact as of October 1 you have lost money, almost 5%. How can that be? Again there are many factors but it is because the FXI is priced in US Dollars, where the Shanghai Composite is priced in Yuan. So the FXI has been crushed with the strength in the US Dollar over September. You can try to hedge out this risk in the Foreign exchange market but as a retail trader that is unlikely to help you. SO what do you do? Watch.
Disclaimer: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.