Will currencies hinder your Chinese and Indian securities?

January 5, 20153 Comments

yuan

You may be aware that I have been long the Chinese and Indian markets for the latter part of 2014  – here’s one of my blogs on that call: https://www.valuetrend.ca/?p=3341

One of my clients recently asked me about the Chinese Yuan. Specifically, they wanted to know if the Yuan might be a negative, or a positive vs. our own loonie, or the US greenback.

Today’s chart – above – shows the Wisdom Tree Chinese Yuan ETF, (CYB-US)  which closely tracks the Yuan. As you will note, the Yuan recently pulled back – but it managed to hold a 5-year trendline. In fact, last weeks action provided some evidence of that trendline holding.

My prognois is that the Yuan will represent a reasonably safe bet for the coming year. Watch the trendline for continued support – a break would be bearish. So long as the trendline holds, it is my opinion that unhedged ETF’s and/or Chinese stocks (ADR’s) are unlikely to be too affected by violent current action in the coming year.

Let’s pull up a chart of my other emerging markets currency exposure – the Indian Rupee. As you can see, the Rupee (vs. USD) is coming into a bit of technical resistance—with some signs of breaking out. Thus, my comments would be similar to the Yuan regarding currency risk of the Rupee – that is, buying ADR’s and non-hedged ETF’s trading Bombay stocks should not be at too much risk of a currency drawdown. A failure to hold above 62-63 might suggest a potential currency drawdown on your Indian stock or bond holdings, but so far, so good.

rupee

 

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Learn Technical Analysis

I’ll be conducting a free technical analysis workshop at the Richview Toronto Public Library: 1806 Islington Ave, Toronto, ON M9P 3N3 – January 14, 2015 @ 7:00 PM. This may be my last library seminar for the winter, so if you live in the area – Come out and join the discussion!

3 Comments

  • A few articles ago you liked what was then developing with Russell 2000 (IWM). But you said you were looking for confirmation which based on the last few sessions did not confirm. I presume then you have not executed on it yet. Wondering what your current insight and projection is? Do we hold off until the overall market settles?
    Do we wait specifically for it to break the resistance point and hold?

    I do like the idea of the Russell especially now that it has corrected a tad. But that correction is market wide so just wondering if and when we pull the trigger.

    I believe the SC rally ends Jan 5 in which case we are seeing the correction from that rally. I recall Brooke demonstrates a lower S&P 500 until later in the month of Jan so wondering if that still seems reasonable, then perhaps get in at this price now and by March/May IWM will be higher, maybe with troughs along the way.

    May 2015 be filled with opportunities. Daddyo

    Reply
    • Hi Daddyo/Phil
      I did buy a small position after IWM held the breakout for 3 days–but as you note, it (and everything) just fell. That’s life! Note that it is holding out relative to the market better. I feel that the formation is strong enough, and the seasonals are there–I don’t mind holding IWM for what I hope to be a pop into the spring.
      and regarding the other comment–I’ll cover NG soon!

      Reply
  • Another topic of interest to some of us is “how low can it go…. and will it rise if the winter does get harsh?” I’m referring to Natural Gas.
    Yes we need an “arctic vortex” or something to consume gas in heating and drive demand. Just wondering what your current expectations are for NG and might it be a flyer at this low price with expectations of higher prices sometime in the next 3 months simply from demand or from over correction. I have not looked at inventories recently.

    Thanks Daddyo

    Reply

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