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Is China Entering a Bear Market?

Monday, 27 Aug 2012 | 5:27 PM ET

If you’re a trader, chances are you’ve got an eye on the FXI - the iShares China ETF is nearing bear market territory.

The index which tracks select China-based companies has now fallen roughly 17 percent since its 52-week high hit back on February 29th and is down again today. A decline of 20% or more would be considered a bear market.

Under the Radar Risk: China
The FXI has now fallen roughly 17 percent since its 52-week high hit back on Feb. 29. Is China about to take down the US market?

China weakness is among the catalysts that have led traders such as Steve Cortes of Veracruz to short the S&P. He believes it's not possible for the S&P to advance if China is very weak because the two economies are so interdependent.

And Cortes is far from alone. Strategic investorDoug Kass has told us he thinks the S&P has put in a high for the year - in large part because of China.

But Kass isn't only concered by the FXI, he has identified other signals.

For example, the latest export data out of Tokyo shows “Japan exports to China, which is their largest trading partner, notably fell by almost 12%,” said Kass earlier in the month.

Also he pointed to Hewlett Packard which cited China as a source of pervasive macro-problems for the company.

Kass, Cortes and other skeptics consider all these developments as confirmation that China’s economy is eroding. “I’m afraid that China is in for a crash landing,” concluded Kass.

Of course, not everyone is a China bear. For the bull story watch the video.

Posted by CNBC's Lee Brodie




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