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Foreign exchange is vital in understanding the manner in which one currency can be exchanged for the other or the manner in which a currency can be converted to another currency. Comparing the foreign currency of the home country when compared to that of a foreign country is vital to any investor to understand how the difference will affect a choice on investment. This paper aims at analyzing the foreign currency of China which has a fast-growing economy when compared to that of The US over a period of five years.
Chinese and US ETFs
China is considered to be the second-biggest center around the world of stock trading. It falls just behind the United States and is also on its way to become the largest innovative economy around the world which makes it an attractive market for investors. It is worth noting that the Chinese market is volatile and thus the investors need to be ready to face ups and downs, especially in relations to ETFs. The ETFs for China is China Internet. Background information indicates that in the first half of the year 2013 it is estimated that 26 million Chinese opened new browsers (Yahoo Finance, 2018).
The internet market in China is dominated by local organizations with a control of 65.7% of the whole market. The online advertising market in China was estimated to be $11 billion in the year 2012 and is anticipated to grow even more. At the moment, China has the largest smartphone market around the world and as of 2013, it was bigger than that of US. It is the reason why the investors are more interested in the East for good business.
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Another major ETF is the Direxion Daily FTSE China Bull 3X ETF or YINN which is an ETF that is leveraged. It is regarded as being leveraged because it seeks to surpass the FTSE China 50 Index by approximately 300% and thus should be regarded as being high risk. The fundamental index includes more than 50 big companies that are trading in the Hong Kong Stock Exchange. Its average volume is 1,677,809 while the net asset is $286.83 million. The ETF for the United State is iShares Core S&P 500 ETF of IVV that provides a tight benchmark outcome with low costs. The ETF is considered to be liquid for every kind of investor. In addition, the ETF avoids any form of cash drag and the returns are high (Yahoo, 2018).
Comparison of the USD and Yen
Analysis of the currency of the two countries indicates that the USD is stronger than the Chinese Yen even though China’s economy is developing fast. Further analysis according to appendix one shows that over the last five years, the dollar has strengthened over the Yen (SignalTrend Inc., 2018). However, the rate at which the USD is increasing when compared to the Yen is slow. The fact that the USD has been able to remain strong against the Yen over the five years, it means that foreign investors would benefit when they invest in China.
Even though the Chinese market is considered to be volatile, which is supported by the fact that it has a big internet and technology market that is expected to change constantly, its currency has managed to remain relatively stable. It means that foreign investors are likely not to lose from currency risks. However, investors also need to understand that based on the information that has been provided in the past five years then it is less likely that it would be stronger than the Yen. Companies in the United States are considered to be strong in their performance.
In conclusion, it is evident that China is an attractive market for investors because it is considered to be the second-biggest center around the world of stock trading. It falls just behind the United States and is also on its way to become the largest innovative economy around the world which makes it an attractive market for investors. The EFTs in China includes China Internet and the Direxion Daily FTSE China Bull 3X ETF or YINN which is an ETF that is leveraged. On the other hand, the major EFT in the United State is iShares Core S&P 500 ETF of IVV that provides a tight benchmark outcome with low costs. From the analysis of the currencies of the two countries, it is evident that the USD is stronger than the Chinese Yen even though China’s economy is developing fast. Further analysis according to appendix one shows that over the last five years, the dollar has strengthened over the Yen.
However, investors also need to understand that based on the information that has been provided in the past five years then it is less likely that it would be stronger than the Yen. Companies in the United States are considered to be strong in their performance.
