China is the world’s second largest economy behind only the United States. Japan is the third largest economy, and for many years now, China’s equity markets have easily outpaced Japanese stocks. Recently, however, the tale of these two Asian markets has been a case study in contrasts.

In the chart here of the iShares FTSE China 25 Index (FXI), a fund pegged to the largest 25 stocks in the Hang Seng Index, we see a big drop since mid April. Stocks in the Chinese market now have fallen below their 50-day moving average, and they are making a rapid move down toward their 200-day moving average.

Compare FXI’s latest downward move with the move higher the iShares MSCI Japan Index Fund (EWJ), a fund pegged to the fortunes of the Japanese stock market. As you can see, EWJ plunged immediately following the March earthquake/tsunami/nuclear disaster, but since early April EWJ has enjoyed a big move higher.

The fund now has risen beyond its 200-day moving average and its 50-day moving average on big buying volume. The action has been so bullish in Japan that we’ve issued new buys in Japanese stocks in both my Successful Investing and ETF Trader advisory services. Click on the respective links here for more information on how you can begin profiting from the rise of the land of the rising sun.