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Golden Dragon China PGJ

Golden Dragon China ETF PGJ is focused on the US-listed Chinese companies that is being affected by several issues:

1. Potential US delisting. The SEC has now started to list companies that face high delisting risks. This issue has been simmering for a while but is getting hot again.

2. Russia-Ukraine war has sensitized investors to risks in Chinese stocks if China-Taiwan issue flares up, or Russia relies/leans on China to escape some Western sanctions.

3. Covid-19 is spreading again in China and some cities have reimposed partial restrictions. The old Chinese policy of zero-tolerance for Covid-19 is also not working.

These issue have been mentioned within several threads, but this thread is started to collect related information in one place. There are several China funds, but PGJ may uniquely capture multiple China risks in one fund. It peaked in mid-February 2021 when many US speculative stocks also peaked.

PGJ at ETF.db https://etfdb.com/etf/PGJ/#etf-ticker-profile
PGJ at Stockcharts (2-yr, reset if defaults to 1-yr; bottom panels show $VXEEM (that is EM "VIX"), $SPX) https://stockcharts.com/h-sc/ui?s=PGJ&p=D&yr=2&mn=0&dy=0&id=p52602404535
News1 https://finance.yahoo.com/news/china-tech-rout-deepens-amid-020459036.html
News2 https://www.cnbc.com/2022/03/14/asia-markets-russia-ukraine-war-covid-omicron-wave-in-china-currencies-oil.html

Comments

  • Russia has formally asked China for arm support since China has promised full support last week. This alone could cloud the issue of whether investors should invest with China, in addition to the concerns that @yogibb highlighted.

    #3 above is problematic and bad timing. Why are the Chinese are not more vaccinated?
  • #3

    I think the Chinese recognize ( but will not admit) that their vaccine is only 50% effective against delta; it may be even worse against Omicron.

    While we all think Omicron is milder, I do not have data on it's relative virulence vs delta in unvaccinated, or ineffectively vaccinated people ( will find some).

    Hong Kong ( apparently only 30% of old people are vaccinated) is having a bad time with covid, with seven day average death rates currently as high as 35/1,000,000. At it's worse, last summer USA death rate was 10/1,000,000 ( that was Delta. Omicron peak was 8.

    They hope with draconian measure they can stop deaths and hospitalizations unlike USA where both just kept on trucking.

    I don't think many people in China have died yet or at least the Chinese haven't said many people have died)

    If you are still interested in China investments, look at Krane ETFs. they have a long article on avoiding ADRs and buying only shares listed in Hong Kong or China directly. While the ADRs may stop trading, shares overseas will not, although they could fall in value, as capital in ADRs disappears.
  • edited March 14
    I concur with your assessment on COVID. With respect to COVID death in China, I don’t think that data was public released and verified. It is more likely than not that the death figure is much higher, given the high population density and limited medical care.

    China is an important component in the EM index, but there are many concerns, especially today. The delisting of many Chinese firms in US indexes is alarming and why are they there to begin with if they fail to fulfill the reporting/auditing requirements.

    Several years ago, Andrew Foster of Seafarer asked whether China market is investable. I have since reduced my EM exposure.
  • @sma3 - Correct me if I'm wrong but believe it was you who brought this doctor, Katelyn Jetelina, to our attention. Anyway she emailed this today:

    State Of Affairs, March 14
  • News is that some sort of compromise may develop for the US-listed Chinese stocks. China and HK markets are up strong and the ETF PGJ is also up strong in pre-market trading.

    https://www.cnbc.com/2022/03/16/china-says-it-will-support-chinese-ipos-abroad-calls-for-closure-on-tech-crackdown.html
  • edited March 16
    Bloomberg is reporting China’s Dragon popped 24% last night. I’d already decided to initiate an additional purchase of DODEX today as part of a scheduled rebalance. Since my portfolio’s been driven so out of whack by the erratic first quarter markets, I moved up the normal end of quarter rebalancing.

    Since the trade goes through at the end of today, I’m hoping DODEX won’t “pop” too much today. Am guessing it will be up about + - 10% today. It has 60% in SE Asia. Not sure how much in China. The initial investment roughly 3 weeks ago is down 12-13% (but feels like more).

    Any guesses where DODEX will end the day? I’m also wondering if there’s any FVP that might be employed to lessen the impact on investors in the fund from a giantic move like the one in China overnight?
  • @Mark I would like to take credit for that epidemiologist but I don't think it was me. That is a great site !

    @Hank

    KWEB which is all China internet is up 30% today since yest close. The pop in DODEX depends on what % is Chinese tech, I think.

    Yesterday I read the recommendation of the online newsletters I follow The Felder Report to buy KWEB.

    I was going fishing so I said, "What difference will a day make?"

    OF course if you bought it before March 3rd or so you are still underwater today at $29.

    At least I caught my first Rainbow of the year. Can't wait till the stripers show up!
  • Why is the Chinese stock market up today?
  • @sven, see the AM posts.
  • edited March 16
    Sven said:

    Why is the Chinese stock market up today?

    I don’t ever remember any market moving 30% in a single day - though I suspect it’s happened. The Dow fell about 25% one day in ‘87.

    I think to some extent it’s a relief rally. EM - especially Europe & China - has been brutally pummeled for a year. Accelerated past few months. I suspect short sellers have been at work and now having to cover their shorts - but have no knowledge of that.

    Apparently the Chinese govt. made some remarks or monetary changes favorable to investors. And they seem to be somewhat receptive to staying out of the Russian Ukraine matter. And there were some signs of progress in the Ukraine / Russian talks, though I don’t think they materialized.

  • Really appreciate your assessment. Wild day for emerging market. Will rebalance more once things settle a bit.

    What concerns me is China is undergo lockdown in several large cities with several thousands cases of COVID. One is the city equivalent to the silicon valley where they manufacture high value products include Apple products. Could this be a replay of March 2020?
  • edited March 16
    “What concerns me is China is undergo lockdown in several large cities with several thousands cases of COVID.”

    Yes. Agree. They’ve taken a different approach to Covid and not great results. Short sellers (hedge funds and the like) have huge impact on markets today. When the tide turns, they rush in to cover their shorts as the market rises. I suspect that’s Cathie Wood’s problem. Some day ARKK may “blast off” in similar fashion - though I’m not making any bets.

    DODEX gained 8.5% today. Good for my prior holding - but not so good for the additional 20% I added today.

    PS - Speaking of ARKK, +10.4% today. Happy for those who ride own it.
  • CW is not someone I want to invest with. I prefer Warren Buffet’s steady approach. Sold most of my EM positions last year and had a decent gain. Reallocated to developed market lately, but they got hammered hard lately. Not too many safe options left and they change rapidly this year.

    @sma3 mentioned the Chinese vaccines are not so effective, 52% compared to 90+% from the mRNA based vaccines. There is a new variant, Deltacron recently found which is highly contagious but the virulence effect is unknown. I will be ready when the booster is available in the fall.
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