People still write about the Great China Trade War News on a daily basis, but few are pointing out that China (CSI 300) actually has been a top performing equity index since the July lows. As we wrote in our post, China fear is No News, back in early July:
A common tendency among investors is to get emotional as they read on hot topics such as the China Trade War situation. Getting fearful about China here is a late trade.
Not only has the Chinese stock market been a dog lately, volatility has also shot up substantially. Note the implied volatility chart (blue) and the fact it trades well above the 30 and 60 day historical volatility. Fear is already in the market and is no news really.
The CSI 300 is breaking up today and putting in a strong candle. Next bigger resistance is the down trend line (just above the 3600 level) and the 50 day average.
As we pointed out volatility was already in “panic” mode in early July. These types of elevated volatility levels many times mark great contrarian levels, where markets suddenly turn around.
Note how volatility of the China ETF (FXI) is down substantially over past 10 days.
CSI 300 (white), SPX (orange), Euro Stoxx 50 (yellow) since the July lows. CSI 300 is the clear winner.
Source: Charts by Bloomberg
