China has been in headlines in recent days for reasons ranging from a potential economic slowdown to concerns about what appears to be an environment of zero loan growth among banks there.
China, an essential component of the “BRIC” economies, has clearly lagged the broader markets for some time now. As measured by iShares FTSE/Xinhua China 25 (NYSEArca: FXI), year to date the fund has lost 6.11% versus iShares MSCI Emerging Markets (NYSEArca: EEM) down 1.61% and the S&P 500 up 5.59%. Even if one goes out 5 years of rolling performance, China still is in the rear in terms of returns (FXI -14.39%, SPX -13.16%, EEM -11.63%).
FXI is heavily weighted toward financials, with a 53% sector weighting and owning names such as China Construction Bank Corp., Industrial and Commercial Bank of China, and Bank of China Ltd. for instance.
Global X China Financials (NYSEArca: CHIX) actually focuses on specific exposure to the Financials sector within China, by investing in the banking names mentioned earlier in addition to banks and insurance companies such as Ping An Insurance Group, China Overseas Land & Investment Ltd, and China Merchants Bank Co, Ltd. for example.
For those uncomfortable with heavy Chinese exposure in their portfolios, and specifically for those that are concerned that the current banking issues in China may degrade further throughout the summer, ProShares Ultrashort FTSE/Xinhua China (NYSEArca: FXP) delivers two times the daily inverse exposure to the same index that FXI tracks.
This ETF has had quite a run recently, climbing 38% just in the month of May, and is now trading above its 200 day moving average (has closed the past six sessions above this level). Similarly, Direxion Daily China Bear 3X (NYSEArca: YANG) provides three times the daily leveraged inverse exposure to the BNY Select ADR Index.
iShares FTSE/Xinhua China 25