China A-shares exchange traded funds have become popular tools for retail investors to directly trade mainland Chinese equities, and now Direxion Investments is working on an inverse play to hedge against potential turns.
According to a recent Securities and Exchange Commission exemptive relief filing, the prominent geared ETF provider is working on the Direxion Daily CSI 300 China A Share Bear 1X Shares, which will be listed on the NYSE Arca. No ticker symbol or expense ratio have been provided.
The inverse A-shares ETF will try to reflect the daily single inverse, or -100%, performance of the CSI 300 Index.
“The Fund seeks daily inverse investment results that are subject to compounding and market volatility risk,” according to Direxion. “The pursuit of its daily inverse investment objective means that the return of the Fund for a period longer than a full trading day will be the product of the series of daily returns, with daily repositioned exposure, for each trading day during the relevant period.”
Consequently, due to compounding issues, the long-term performance may not perfectly reflect the -100% of the underlying index, especially during volatile market conditions. [Do You Know How Your Leveraged ETFs Work?]
The proposed bearish China ETF will act as an inverse play to the popular Deutsche X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR), which takes the unleveraged long position in the China Securities 300 Index, or CSI 300 Index.