After displaying technical leadership in the context of the broader Emerging Markets, China’s relative strength has all of a sudden stopped short, as evidenced by the recent gap-down action in FXI (iShares China Large Cap, Expense Ratio 0.72%) as well as broad EM proxies like EEM (iShares MSCI Emerging Markets, Expense Ratio 0.67%) and VWO (Vanguard Emerging Markets, Expense Ratio 0.18%).
Trading volume in the EM space via ETFs yesterday was nothing short of tremendous, and we witnessed downside put action in both FXI and EEM in the marketplace as well, perhaps demonstrating the willingness of investment managers to brace for even more protection in the EM space in case of additional downside.
FXI is of course the largest China focused ETF across the landscape, currently holding north of $6 billion in assets under management. Other China centric ETFs that will be in focus in the near term include EWH (iShares
MSCI Hong Kong, Expense Ratio 0.52%), MCHI (iShares MSCI China Index, Expense Ratio 0.61%), GXC (SPDR S&P China, Expense Ratio 0.59%), PGJ (PowerShares Golden Dragon Halter USX China Portfolio, Expense Ratio 0.60%) to name just a few of the larger ones in terms of AUM, but also leveraged products YINN (Direxion Daily China Bull 3X Shares, Expense Ratio 0.95%) and YANG (Direxion Daily China Bear 3X Shares, Expense Ratio 0.95%) may appeal to aggressive speculators and hedgers alike given the recent volatility in the space.
We are surprised that YINN and YANG do not see more daily play (YINN ADV is 142,000 shares while YANG’s ADV is 26,000 shares), but as volatility heats up in Chinese equities specifically, an uptick in activity among both funds is inevitable.
Other trading designed, leveraged/inverse funds in the space that will also likely hit more radars this week include YXI (ProShares Short FTSE China 25, Expense Ratio 0.95%) and FXP (ProShares UltraShort FTSE China 25, Expense Ratio 0.95%).