Chart of the Day: China’s Warning Shot to Investors

For a decade, you’ve heard the glowing stories: enormous GDP growth, massive infrastructure building — even 15-story hotels being built in six days… China’s growth is unstoppable. It’s only a matter of time before it overtakes the United States as the largest economy in the world.

Not so fast…

China’s market is flashing a major warning sign. If you have money invested in Chinese stocks, keep a close eye.

I use the iShares FTSE China 25 ETF (NYSE: FXI) as an easy way to keep tabs on China’s market. It holds 25 of the biggest companies in China, across all industries… banks, telecoms, oil companies. You can think of it as China’s Dow Jones Industrial Average.

Well, China’s “Dow” is having problems:

A period of consolidation after a big rebound would be expected if this were anywhere but “unstoppable” China. And when you compare that flat performance with our own Dow, which has gained about 30% in the same time frame, you really start to see the trouble brewing.

If you’re invested in China, you should be watching your holdings like a hawk. There’s something wrong with one of the decade’s greatest growth stories.