Still ‘lots of upside’ in China trade: BTIG By Investing.com

Trade with China has performed well over the past year, although it has not been an easy one, BTIG analysts said on Tuesday.

From its lows in late January to highs in mid-May, the iShares China Large-Cap ETF ( FXI ) is up 41%. It then fell 17% through August before rising 22% to hit new 52-week highs.

On a relative basis, FXI is up 24% year-to-date, outpacing SPY’s 20% gain. However, the higher-beta KraneShares CSI China Internet ETF ( KWEB ) lagged behind, up just 9.4% year to date.

“Looking at the bigger picture, we believe there is still a lot of upside in this transaction,” the analysts commented.

In 2023, the Hang Seng ended its fourth consecutive year of losses. Historically, since 1965, the index has only fallen for three consecutive years twice: 1967 and 2002.

In the five years after 1967, the Hang Seng posted returns of 62%, 44%, 36%, 61% and 147%, while after 2002 the index gained 35%, 13%, 4%, 34% and 39%. %.

While this is a small sample size, BTIG analysts suggest that given current sentiment and positioning, “it’s not hard to imagine a decent run for China here.”

FXI recently hit a new high for 2024 and is close to breaking the August 2023 high. A break above this level would fill a significant base and confirm a long-term double bottom that could signal upside potential towards 40, a rise of 32%.

Meanwhile, KWEB has room to return to its May highs of 32.60 in the short term, with its 2023 peak of 36 above it.

“It’s always difficult to buy something after it’s had a big move up,” the analysts commented. “Often, the hardest trade is the right trade, and we think that’s the case here. A breakout worth watching,” they concluded.