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Subject:  ETFs for Chinese Bonds? Date:  1/25/2013  1:55 PM
Author:  globalist2013 Number:  34723 of 35909

There seem to be three ETFs that invest in Yuan-denominated bonds: DSUM, RMB, and CHLC. If you pull 5-day charts, you’ll see how illiquid they are. But if you pull 3-month charts, you’ll also see that DSUM is interesting and wish you’d gotten in as it came off its bottom.

Here’s the 5-day chart for DSUM. That’s thin, right? Shares trade by appointment only. By contrast, here’s charts for PCY and EMB.;range=5d;c...;range=5d;c... Now, do this. Switch the settings to ‘line chart’ and plot all three.;range=5d;c... Not entirely, and not with 100% assurance, but you could cue off the more liquid ETFs that roughly fall into the same category of “Emerging Market Bond ETFs to time your entries/exits for DSUM.

OK, keep that thought in mind and consider this one. Throw the three funds that invest in Chinese bonds on your screen, but in a long enough time-frame to overcome illiquidity, say, a 3-month look-back.;range=3m... Now, we’re getting somewhere. We know (from looking) that the three are illiquid. We can also conclude (from looking) that trying to invest/trade RMB would drive you crazy. Its volatility could make you a ton of money. But its illiquidity would lose it even faster. That’s not a fund you should mess with. But take a closer look at DSUM. The line it plots is steady, steady steady. So get rid of CHLC and RMB, and plot just DSUM by itself.;range=3m... Bingo! We’re looking at a possible winner. A 3-month return of 1.92% is almost not worth fussing with except for the fact that return is very, very steady. At this point, off stage, you hear the blare of trumpets and a deep, Carlton Heston voices comes from the clouds saying, “Past performance, etc., etc. OK, accept that warning for what it is, just good common sense.

The values chosen for the MAVs don’t matter. What you want is ‘fast’, ‘medium’, ‘slow’, and 10-20-40 gives you that. Now look at the same chart in a longer time frame.;range=1y... If you used a cross of the ‘fast’ MAV over/under the ‘slow’ MAV, you’d have gotten in and out pretty much where y