China Financials

China financials look cheap or with potential bullish patterns. The wildcard here is like with Japan: is there a nomainal breakout coming that will be fueled by currency depreciation?

Here is the U.S. China Financials ETF, CHIX, sucking wind. It could have a long way to rally if China's markets rise and the currency rises.

At this stage I'd prefer nominal exposure with a currency hedge. I think the current bear market rally around the world would have to transform into an actual bull market, complete with weaker USD and emerging market outperformance, for a pure long China trade to pay off with low risk. That said, looking at something like Shenwan (a stock I liked way back in the 2014 time frame), my sense is a nominal bull market will deliver enough gains to offset currency devaluation. Financials usually get destroyed in currency devaluation/high inflation scenarios, but maybe Chinese banks are so weak and priced cheap for their risk, that high inflation/currency deval would lift that risk.