Macro Tsimmis

intelligently hedged investment

BUY FTSE/Xinhua China ETF (FXI)—Chinese discount

Posted by intelledgement on Tue, 27 Feb 07

Another one of our investment vehicles is on sale today: the iShares FTSE/Xinhua China ETF (FXI) is down big, at the moment more than 10% below the 2006-year-end price, on continuing fallout from the meltdown of the Shanghai stock market (down 9% in Asian trading earlier today). Well the FXI has nothing directly to do with Shangai (all FXI components trade on the larger and less frothy Shenzhen exchange) and China is not about to stop the growth gravy train barring a relatively unlikely (at this point) random event. Thus we see this as an excellent buying opportunity and are double dipping in our spec fund with the hope of cashing in for a quick 20% (three months) or 30% (six months), assuming the closing price for the day is $100 or lower. Stop loss will be set at 20%.

Note: this is another case—as with IFN—where our normal admonitions about the risks of the components of the speculative portfolio are not so pertinent as usual. We own this same ETF in the Intelledgement Macro Strategy Investment Fund and we paid about 17% more per share for that position. It belongs in the investment portfolio because it is an ETF that will not be broken by bad luck effecting any particular company and because the macros strongly indicate it will prosper, at least through the 2008 Summer Olympics. And it belongs here in the spec portfolio because the price has been beaten down to in irresistibly low level. As with the IFN, we are tempted to put a double portion on our plate in this fund and are resisting…but if you surrender to the temptation, you won’t get any flak from this quarter.

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