Companies in China Warn of Lower Earnings (FXI) (EEM)
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Companies in China are faced with a sharp decline in profits. On Wednesday, the top airline brand in China, Air China, warned that first-half profits will be half of what they were a year earlier. The news came amid a flurry of warnings from companies in China, with some warning of steep drops in earnings for the second half of the year.
Last week China data showed a slowdown in GDP growth to 7.6 percent, its slowest rate in 3 years. In response to the deterioration, China policy makers have cut interest rates in the country twice since June.
Premier Wen Jiabao predicted yesterday that the labor situation will become more "severe," highlighting concerns that the weaker economic growth will lead to increasing job losses.
Investors, meanwhile, have shunned Chinese equities. The Shanghai index has delivered dismal returns on a multi-year basis and shares on the Hang Seng index have followed suit.
Considering the rate of slowing and reduced inflation expectations, many analysts are expecting officials in Beijing to provide the economy in China with stimulus through various efforts meant to boost domestic consumption. In response, a few analysts are calling for a second half turnaround in China's economy. Others fear that a turnaround is not in the cards for China yet and it may take much longer than expected to shift the economy back into high gear.
iShares FTSE China 25 Index Fund (NYSE: FXI) is expected to open lower on Wednesday. FXI has returned -7.75 percent year-to-date. iShares MSCI Emerging Markets Index (NYSE: EEM) is lower by 0.5 percent over the same period.
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Last week China data showed a slowdown in GDP growth to 7.6 percent, its slowest rate in 3 years. In response to the deterioration, China policy makers have cut interest rates in the country twice since June.
Premier Wen Jiabao predicted yesterday that the labor situation will become more "severe," highlighting concerns that the weaker economic growth will lead to increasing job losses.
Investors, meanwhile, have shunned Chinese equities. The Shanghai index has delivered dismal returns on a multi-year basis and shares on the Hang Seng index have followed suit.
Considering the rate of slowing and reduced inflation expectations, many analysts are expecting officials in Beijing to provide the economy in China with stimulus through various efforts meant to boost domestic consumption. In response, a few analysts are calling for a second half turnaround in China's economy. Others fear that a turnaround is not in the cards for China yet and it may take much longer than expected to shift the economy back into high gear.
iShares FTSE China 25 Index Fund (NYSE: FXI) is expected to open lower on Wednesday. FXI has returned -7.75 percent year-to-date. iShares MSCI Emerging Markets Index (NYSE: EEM) is lower by 0.5 percent over the same period.
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