The minute the news hit on the chinese paper tariffs, I loaded up on some FXI (china etf) puts [may 103]. Depending on how hhi.hk (heng sang china enterprise index) reacts, I think this could be an easy 5-10pts down. any thoughts here? kind of surprised to see no mention of this in the forums here. first protectionist move I've seen.
problem is fxi is not just china but mostly hong kong. china's exhange has been busting highs daily for days on end yet the fxi is 10% under its jan highs. that said i think china drops 10-20% soon
Obviously Shanghai is different. Those jan highs I believe were a distortion caused by the enthusiasm for the China Life IPO and associated insurers shares. Moreover, one aspect (the bull case) that doesn't get mentioned often was the giant spike in late December caused by a now effective proposal to reduce net taxation on corporate profits to a unified 25% rate. That said, I put this position on as a defensive move (i am long quite a few US securities at the the moment) to capture some possible short term panic selling. And there certainly is a correlation between Shanghai and FXI. If Shanghai is off 10%, FXI usually is somewhere close. I love China as a longer term play ... but this position anticipates at least a test of last month's corrective move, in addition to possible turning of tide for the China story.
I think it highly likely that the tariff battle will hit their market. I see our Feds were calling it a "test case" and they have a dozen other industries lined up wanting similar tariffs. And I see China already is reacting to it. Put em together and it sure sounds like a sell signal to me.