The last few weeks have been particularly tough for China ETFs. Even as the S&P 500 experiences new 52-week highs with its Santa Claus rally, Claymore China Small Cap (HAO) has pulled back roughly 6% from early December highs. The China 25 Index Fund (FXI) has suffered worse, giving back more than 10% from its December peak and falling even further below its 50-day trendline.

FXI SMA 50 Day December 2009

Yet, one peculiarity regarding China ETFs is worthy of addressing; that is, while the SPDR S&P China Fund (GXC) is currently 6.6% off of the same December pinnacle, witnessed extraordinary “buying on weakness.” According to WSJ.com, GXC picked up $20 million additional assets on 6x the normal trading volume. (Note: 120,000 shares typically trade hands, whereas 700,000 traders engaged in this session.)

GXC SMA 50 Day December 09

It would be easy to dismiss China as an overvalued emerging market. In fact, it may even be possible that ex-div dates on semi-annual distributions came into play.

Whatever the reason — yield play, rebalancing act, institutional interest — the folks who were buying on weakness will likely have bolstered their international holdings for a longer term. It may only be a matter of time before sellers complete year-end profit-taking.