Is China on the Verge of a Hard Landing?

• Posted by Robert Sinn
• on June 23rd, 2011

Throughout most of 2011 financial markets have priced in a soft landing in China. Meanwhile, most global GDP growth forecasts have also been predicated upon China avoiding a so called ‘hard landing’ (similar to what the US experienced 2007-2009). Recently, some more serious cracks have begun appearing in the China soft landing thesis. Let’s take a look at some charts:

 

 

China H-shares, Chinese companies incorporated in mainland China that are traded on the Hong Kong Stock Exchange, have fallen over 10% during the past two months.

 

 

$FXI- An ETF which tracks the FTSE China 25, an index consisting of the largest and most liquid Chinese companies. FXI has been in a multi-week downtrend since double topping in April – it is nearing oversold territory & there is major support around the 41 level.

 

 

$EEM- An ETF which tracks the MSCI emerging markets index looks similar to FXI and is also near major support at 44.50.

 

 

$CHL- China Mobile has an ugly chart.

 

 

$INP- An ETF which tracks the MSCI India total return index looks even worse than EEM or FXI on the daily time frame.  However, the picture looks different on a 2-year weekly chart:

 

 

With plenty of headwinds already facing markets ranging from the euro-zone sovereign debt crisis to an uneven US economic recovery & debt ceiling issues, a hard landing in China would almost surely be the straw to break the camel’s back.

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.

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