Trading Trade Tensions

Featuring Raghee Horner

Raghee Horner, managing director of futures trading at Simpler Trading, discusses why she thinks investors have oversold Chinese large-caps. She explains her analysis and highlights two ETFs to watch in this interview with Justine Underhill. Filmed on June 28, 2018.

Published on
3 July, 2018
Topic
Trading, China, ETF
Duration
8 minutes
Asset class
Equities
Rating
1

Comments

  • LT

    Lucas T.

    5 7 2018 16:40

    0       0

    Technically, this is a be that the current break out lower in FXI is false and we will return to the trading range above, very similar in South Korea. I do not like this type of trade personally because by the time FXI hits the 40 range, that breakout is more then confirmed, and a new trading range is likely to form, not a return to the higher one.

  • am

    amit m.

    4 7 2018 19:02

    2       1

    How do we determine skill and track record of presenters of ideas without attribution or daily/weekly PnL of trades

  • WH

    W H.

    4 7 2018 17:26

    2       0

    China equities are not much different now than in 2015, i.e highly leveraged, the difference being systemic leverage is up by say 30 points of GDP. Authorities are forcing deleveraging in the private sector. Trade tensions are a catalyst but not a cause. This makes China equities an endogenous story, not the reverse. Get the causality wrong, you get the trade wrong.

    • RH

      Raghee H.

      7 7 2018 02:33

      1       0

      W H.., I like your point. I think a bigger and longer-term story and certainly not a new one is the shadow banking: A 15-trillion dollar problem for China. The new rules for AMPs are set to go into effect in Q2 2019 and will be a test for Chinese investors. The FXI is a trade, a bounce from support that could retrace the recent sell-off. A relief rally that could play out into Nov. That's the trigger.

    • WH

      W H.

      8 7 2018 15:18

      0       0

      Thanks for your reply and helpful clarification. Policymakers seem to be signalling they would like to see a relief rally, which often carries more weight than anything else. Look forward to your next trade idea. Thx!

  • KJ

    Kulbir J.

    4 7 2018 05:10

    3       0

    I like the trade, just too risky for me right now. Waiting for a drop into the 30s before thinking about going in.

    • RH

      Raghee H.

      9 7 2018 16:01

      0       0

      Kulbir, I like the pullback buy (as I laid out in this trade idea) especially with the 200EMA on the weekly just below. The idea here is to prepare for a bounce "relief rally" trade and then see how much longer the long global equities play to the long side will continue if traders/investors ignore some of the major issues (debt!) within China.

  • DS

    David S.

    3 7 2018 17:28

    1       0

    With all the risks inside and outside of China, much less Korea, this is a risky six-month trade. IMO this trade is a winner over a longer period. This could be a falling knife in the short run. Size small, there will be time to enter on the way back up. DLS

    • RH

      Raghee H.

      3 7 2018 20:22

      1       0

      David, I agree, the risk is getting in too early as far as timing. And it's really a trade that's built around a relief rally/bounce. So rather than buying a potential support level, I am open to waiting for momentum to get me in through resistance as the sentiment shifts. Today's news with MU and the Chinese court injunction not putting in a new low in FXI was a fairly good sign.

    • RH

      Raghee H.

      3 7 2018 20:22

      0       0

      David, I agree, the risk is getting in too early as far as timing. And it's really a trade that's built around a relief rally/bounce. So rather than buying a potential support level, I am open to waiting for momentum to get me in through resistance as the sentiment shifts. Today's news with MU and the Chinese court injunction not putting in a new low in FXI was a fairly good sign.

    • DS

      David S.

      4 7 2018 07:19

      1       0

      Rughee H.: Thank you for your clarification. I believe in China and the power of the Asian market. I am not smart enough to go for the relief rally, but I hope a long-term investment in China is in my future. The question is when. For now I am hedging with cash. I wish you luck in your investments. DLS

  • RK

    Robert K.

    3 7 2018 14:32

    2       0

    Agree with the idea but would not be aggressive here. It is very probably we'll see few more hard legs down to the 34 level in FXI. So I would fish lower down. The Chinese story is not over - there is a worrying corporate debt stress and the comrades might not have the control as they think they have. There are other comrades in the country who need a calamity to stand up to the current elite circle of Winnie the Pooh.

    • RH

      Raghee H.

      3 7 2018 14:45

      0       0

      Hi Robert, that’s the challenge with a play that has a catalyst going into the mid-terms. For me, that rhetoric shift is the uncertainty. I think shorts in the meanwhile need to be nimble

      This is a play on a potential bounce on a tariff relief rally into year end.

      Longer-term, into 2019, I agree. It’s sketchy.

  • CM

    Christopher M.

    3 7 2018 11:12

    3       0

    This is very timely as I was looking to reenter Chinese A-share inclusion using $ASHR or $KBA. This is Chinese equities being included into MSCI global indexes.

    David Brady who I reply to in this tweet https://twitter.com/thousandairefx/status/1013833751711899648 highlighted the correlation between XAU/CNY/USD about 6 months ago and how XAU (gold) should be treated again as a currency and not a shiny rock. The linked article adds the fourth element SDR (IMF Special Drawing Rights) into the equation.

    https://www.tradingview.com/x/KmSYp6vF/ this is a great chart and one that I keep looking at every day at the moment.

    From this, I am looking at a reversal in USD/CNY a bottom in XAU/USD and Chinese equities.

    • RH

      Raghee H.

      3 7 2018 13:31

      1       0

      Thanks Christopher, I like your angle as well. I agree this can be played in a number of ways and the Kranshare ETF offers a great cross-section of exposure. Gold is definitely the currency of "goldtopia" and as a forex trader, it absolutely behaves like it. I think today with the rather unorthodox release from China's customs agency, showing that exports to the US have dropped is akin to the kind of shift I want to see to make the FXI start to stabilize: "China’s customs agency broke with protocol late on Monday, releasing first-half and June export data days ahead of schedule and giving a rare breakdown for shipments to the United States...The administration rarely releases country-specific export data ahead of the overall monthly trade data. It is scheduled to release China’s June imports and exports figures on July 13 as well as the exact value of the country’s trade with its major trading partners, including the US. The preliminary release of the US number came ahead of the day Beijing and Washington are expected to impose tariffs on each other’s goods."

      Needless to say I like to the timing too.

    • RK

      Robert K.

      3 7 2018 14:33

      1       0

      With you in XAU/USD (although for other reasons).