Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Think Chinese Stocks Have More Downside? 2 Inverse ETFs Offer A Bearish Edge

By Investing.com (Tezcan Gecgil/Investing.com )ETFsJul 12, 2021 10:19
uk.investing.com/analysis/think-chinese-stocks-have-more-downside-2-inverse-etfs-offer-a-bearish-edge-200486018
Think Chinese Stocks Have More Downside? 2 Inverse ETFs Offer A Bearish Edge
By Investing.com (Tezcan Gecgil/Investing.com )   |  Jul 12, 2021 10:19
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Equities in China, the world's second-largest economy behind the US, have been making headlines. Regulators in the Asian nation have been targeting tech names that are, or plan to be, listed overseas. Most recently, following tighter regulation by the Cyberspace Administration of China (CAC), shares of the ride-hailing company Didi Global (NYSE:DIDI) have come under pressure.

On June 30, Didi had its initial public offering (IPO) in the US. The stock opened at $16.65 and reached a high of $18.01 the same day. However, by July 8, the shares were down to $11 and are now hovering at $12.

Raising capital overseas has been gaining momentum among many Chinese businesses. But Beijing's restrictive stance has led to investor unease and declines in many China-headquartered stocks on Wall Street.

Several widely-followed exchange-traded funds (ETFs) that focus on China have also been adversely affected. They include:

  • Invesco China Technology ETF (NYSE:CQQQ): down 4.3% year-to-date (YTD) and down about 5.8% so far in July;
  • Global X MSCI China Consumer Disc ETF (NYSE:CHIQ): down 6.5% YTD and down 5.7% in July (covered here);
  • KraneShares CSI China Internet ETF (NYSE:KWEB): down 18.4% YTD and down 10.3% in July (covered here).

Meanwhile, the SZSE Composite index returned about 4.6% YTD, and the Shanghai Composite is up 2.1 % YTD. Despite their moderately positive performance in 2021, both indices have been choppy in the past few weeks.

As the risk premium for investing in Chinese businesses, especially in the tech sector, increases, many investors wonder how they can protect their current holdings of Chinese stocks. Given the policy uncertainty, others might want to benefit from further declines in those shares. One possibility could be to put together an options-based strategy to protect their existing stock of ETF holdings and hedge against a fall in price in the near future.

Other readers, especially short-term traders, could consider buying an inverse ETF, a topic we have covered in detail before. Such a move could be regarded as a tactical trading alternative to selling an existing stock or fund position. Today, we'll briefly discuss such two inverse ETFs.

1. Direxion Daily CSI 300 China A Share Bear 1X Shares

  • Current Price: $16.88
  • 52-Week Range: $15.05 - $22.77
  • Expense Ratio: 0.85% per year

The Direxion Daily CSI 300 China A Share Bear 1X Shares (NYSE:CHAD) seeks to achieve daily investment results of 100% of the inverse (or opposite) of the performance of the CSI 300 index. Put another way, CHAD is set up to move in the opposite direction of this benchmark on a daily basis. The fund started trading in June 2015, and has about $127 million under management.

CHAD Weekly
CHAD Weekly

The CSI 300 index is a modified free-float market capitalization (cap) weighted index. It is made up of the most liquid and largest shares in the Chinese A-share market.

Many of our readers might already know that China A-shares are renminbi (RMB)-denominated equity shares of China-headquartered firms that trade on the Shanghai and Shenzhen Stock Exchanges. They are also known as domestic shares.The leading 10 stocks comprise about 25% of the index.

Among them are Kweichow Moutai (SS:600519), China Merchants Bank (SS:600036), Wuliangye Yibin (SZ:000858) and Gree Electric Appliances Inc of Zhuhai (SZ:000651).

In the past year, the CSI 300 Index is up about 6.7%. However, the CHAD ETF is down almost 22%. This difference in returns is a strong reminder of how such inverse funds are mostly appropriate for short-term traders.

2. Direxion Daily FTSE China Bear 3X Shares

  • Current Price: $15.04
  • 52-Week Range: $9.34 - $28.06
  • Expense Ratio: 1.07% per year

The Direxion Daily FTSE China Bear 3X Shares (NYSE:YANG) is a leveraged ETF. It seek daily investment results of 300% of the inverse of the performance of the FTSE China 50. This index comprises the 50 largest and most liquid public Chinese businesses listed on the Hong Kong Stock Exchange. YANG started trading in December 2009, and assets under management are close to $36 million.

YANG Weekly
YANG Weekly

The top ten names in the FTSE China 50 Index make up over 55% of the holdings. Tech giants and internet platforms including Alibaba (NYSE:BABA), JD.com (NASDAQ:JD)), Meituan (OTC:MPNGY), Tencent (HK:0700) (OTC:TCEHY) and NetEase (NASDAQ:NTES) are among the leading stocks in the index. These names and many of their peers have come under pressure in recent days.

Over the past 52 weeks, the FTSE China 50 Index is down 1.6%. On the other hand, YANG has lost over 30% of its value. Experienced traders who continue to be bearish on these tech businesses could find short-term opportunity in YANG.

Think Chinese Stocks Have More Downside? 2 Inverse ETFs Offer A Bearish Edge
 

Related Articles

Think Chinese Stocks Have More Downside? 2 Inverse ETFs Offer A Bearish Edge

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Oc Masai
Oc Masai Jul 12, 2021 13:50
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Network coverate like turtle. Slow moving. Bullish thanks you ms tezcan
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email